Still growing thanks to huge capital expenditure
Overview:
Albania is bucking many of the trends seen elsewhere in the region. On the positive side the economy is still growing at a decent pace and FDI inflows are strong due to privatization proceeds. Less good news is that the current account deficit remains large given that softer worker remittances are offsetting a smaller trade deficit. Much of this atypical economic picture is a result of a massive surge in capital expenditure due to the construction of the highly controversial road from Albania to Kosovo. This has contributed to a sharp deterioration in the fiscal balance, a significant likely overshoot of this year’s budget deficit target and increasing public debt. The new, Berisha-led coalition government must urgently consider some fiscal adjustment even it does not wish to obtain a new IMF program.