Page 29 - SE Outlook Regions 2023

The International Monetary Fund (IMF) expects Albania’s economy to
grow by 3.7% in 2022, the fund said in the concluding statement of its
2022 Article IV Mission. Growth in 2022 is backed by “robust activity” in
tourism, real estate and services, according to the IMF. However, it is
expected to slow to around 2% in 2023, which the fund attributed to
expected tighter financial conditions, the slowdown in Europe and the
withdrawal of policy support.

“The Albanian economy has weathered multiple shocks since 2019
relatively well. Although Albania’s direct exposures to Russia’s war in
Ukraine are limited, with twin deficits and high government debt,
Albania now faces challenges stemming from soaring international food
and energy prices, tighter global financial conditions which are likely to
persist, and the economic slowdown in Europe,” the IMF commented in
a statement.

The European Commission forecasts growth will fall to 3.2% this year
and further to 2.6% in 2023 amid weakening private consumption and
investment, before rallying to around 3.4% in 2024.

Commenting on the slowdown, the Commission noted the high inflation
rate this year, despite regulated electricity prices and currency
appreciation that have kept the rate below the double digits seen in
some of Albania’s neighbours.

The slowdown next year will be caused by “weakening private
consumption and investment in the face of uncertainty about prices and
development of trade partners,” the report said.

“For 2023 and 2024, growth is set to be strongly affected by uncertainty
over whether the government increases the regulated electricity price
and how the war will impact exports to and investment from the main
trading partners in the EU,” it elaborated.

“In addition, household consumption in 2023 is expected to be
impacted by the negative effect of lasting high food and transport
prices, as these items account for almost half of the household
budgets.”

After Albania stepped in to support the economy and poorer segments
of the population during the pandemic and again this year as energy
prices rose, the Commission warns that possibilities for fiscal stimulus
will be limited in 2023, due to tightening external financing conditions
and the likely need for increasing subsidies and social support.

The World Bank projects average GDP growth of 2.7% through 2024,
which is below the rate seen before the earthquake that struck parts of

29 SE Outlook 2023 www.intellinews.com