London Report Makes Upbeat Forecast on Albania Economy

London-based BMI Research has upgraded Albania's GDP growth forecast for this year and next, based on a favourable climate for investment and a rise in local consumption.

Tirana by Ivana Dervishi/BIRN

Albania’s GDP is expected to show better-than-expected growth during this year and in 2018, as result of a good climate for domestic and international investment as well rising private consumption.

BMI, a London-based research firm that provides macroeconomic, industry and financial market analysis, upgraded the GDP growth forecast for Albania to 4 per cent in 2017, up from a previous estimate of 3.6 per cent.

“We now expect growth to come in at 4.0 per cent in 2017, up from a previous estimate of 3.6 per cent, as the external sector continues to benefit from better-than-expected real GDP growth in the eurozone,” it reads.

Growth in 2018 is expected to counter a regional slowdown as BMI researchers believe the good local climate will help overcome it.

“We have upgraded our 2018 growth forecast for Albania to 3.7 per cent from 3.3 per cent, as easy monetary policy and decreased perceptions of political risk will support investment and private consumption,” it reads.

Considering the country’s economy to be on a strong footing, BMI emphasises that besides the expected boost from the Trans Adriatic Pipeline, TAP, and falling unemployment, Albania has been helped also by the external environment.

“At the start of 2017, our growth forecast for Italy – Albania’s main trade partner – was at 0.9 per cent but we have made successive upward revisions and the forecast now stands at 1.4 per cent,” it explains.

While the report takes account of the inflation rate and Central Bank monetary policies, it emphasises Albania’s relative political stability as a positive factor.

According to it, the outlook for investment has also been bolstered by the relatively smooth passing of the June general elections, which “saw the Socialist Party, led by reform-minded Prime Minister Edi Rama, win an outright majority.

“The election result, which came despite risks of a crisis, will boost the confidence of both domestic and international investors, with the latter set to provide the bulk of financing for an ambitious infrastructure investment program over the coming years,” it reads.

The economic rise of Albania during 2017 has also been foreseen by other think tanks and economic research groups.

One of the main reasons is that this year is considered the peak year for major foreign investments that have passed through Albania as a result of the TAP project.

The pipeline passes through Albanian territory for 252 kilometres, on and offshore. Coming from Greece, it touches around 40 Albanian villages and ends up in Puglia region of Italy after traversing the Adriatic Sea.

As result of the TAP, Albania is part of Southern Gas Corridor, a gigantic project that will secure gas for Europe directly from the Shah Deniz offshore drilling wells as part of efforts to reduce EU countries’ dependence on Russian gas.

For this reason, Oxford Economics, in its own analysis, emphasises that during 2017 alone, the project “is expected to generate €57 million for Albanian GDP and create 4,200 jobs [part-time and full-time]”.