IMF see no spillovers for Albania from Greek Crisis

As Athens defaulted last evening, for IMF mission in Albania all seemed to be “business as usual” without many concerns about possible Grexit.

An International Monetary Fund (IMF) mission led by Nadeem Ilahi held its press conference on Tuesday afternoon in Tirana expressing confidence about economic recovery of the country and paying little attention to the Greek drama just across the border where banks are closed for business and voters are pondering to accept or to refuse creditors conditions on further financial assistance.

““Spillover risks from the Greek crisis are low. The banking sector is highly liquid and well capitalized, including the subsidiaries of Greek banks. Remittances may be affected by developments in Greece, but have been declining in importance over the past few years. Exports to Greece are not sizable,” said Ilahi on his joint press conference with Albania’s central bank governor and minister of Finance.

Greek banks owns some 33 per cent of the capital in Albania financial system but they are working as separate legal entities and as such, are not affected by the bank holidays in their mother country.

As for the rest, economic growth in Albania expected for this year is being revised down by IMF experts from full 3 per cent forecasted earlier.

“Albania’s economic program continues to make progress. Economic growth is projected to continue its moderate recovery in 2015, reaching between 2.5 and 3 percent. Growth will be driven by a sustained recovery in domestic demand, continued Foreign Direct Investment, and a gradual pickup in bank lending. Inflation is expected to stay low, in part because output still remains below potential.

“There has been a shortfall in tax revenues in the January-May period compared to the budget, because of lower oil prices and production and weakness in tax compliance and administration. The authorities have communicated their commitment to achieving the fiscal deficit target for 2015. Fiscal consolidation has to continue in 2016 to ensure Albania is moving on a path to debt sustainability. Discussions will continue for the completion of the fifth review of the EFF.

“Monetary policy should continue to be supportive of economic recovery, consistent with the Bank of Albania’s mandate of maintaining price stability. Credit growth is recovering but remains low, affected by high non-performing loans (NPLs) and weaknesses in contract enforcement. The government together with the Bank of Albania is developing a comprehensive strategy for resolving the NPL issue.

“Implementation of power sector reform has been good and will ease the fiscal burden this year. Electricity theft has been reduced substantially and reforms of the state-owned electricity companies are proceeding as planned. Sustaining the reform effort is critical in weaning the sector away from state support.

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