2013-03-12 14:29:00 - Fast Market Research recommends "Albania Business Forecast Report Q2 2013" from Business Monitor International, now available

Core Views

Albania's relatively low level of trade and financial integration with Western Europe will not protect its economy from the marked deterioration that has occurred in eurozone macroeconomic and financial market conditions over the past few quarters. The eurozone appears to have slumped into recession, with Italy, Albania's largest export market, a focus of the region's current woes.

Having been denied EU candidate status for the third consecutive year in December, we believe ongoing corruption and a lack of political transparency will continue to stunt Albania's progress towards further EU integration in 2013. We do not expect the country to be granted EU candidate status this year, and believe the country's June 23 parliamentary elections will fail to meet accepted EU

and international standards, adding to the damage already done to the country's accession ambitions.


Full Report Details at
- www.fastmr.com/prod/552220_albania_business_forecast_report_q2_2 ..


Key Risks To Outlook

Albania's strong economic and financial links to Greece and Italy remain a key risk to our outlook, even beyond the extent to which we have factored this exposure into our forecasts. On top of being the source of economically important remittance inflows, Albania's commercial banking sector is dominated by Greek subsidiaries. An uncoordinated credit event in Greece would put those parent banks under pressure, possibly leading to a sharp withdrawal of credit from their peripheral operations.

Partial Table of Contents:

Executive Summary
Core Views
Key Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
Corruption To Persist; Full EU Integration A Long Way Off
- On December 10, Albania was denied EU candidate status for a third consecutive year, with the EU General Affairs Council demanding further progress on judicial reform and public administration transparency. As we anticipated (see our online service, November 6 2012, 'EU Candidacy A False Dawn Albania failed to win the support of other EU member states in the EU's annual enlargement report, while both neighbouring Macedonia and Serbia made further progress in the accession process.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Stumbling Towards The EU
- We expect Albania to continue progressing towards EU membership over the next decade, though caution that forward momentum will be sluggish. Lack of institutional development and endemic corruption remain key challenges to stability over the long term, whose presence will diminish efforts to address systemic problems regarding weak go vernance. Key risks through 2022 will largely revolve around EU accession progress, and we also highlight a possible deterioration in regional relations over the 'Kosovo Issue' as a particular flashpoint of instability.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Bleak Growth Outlook For 2013
- While recently released data from the National Bank of Albania (BoA) showed a 2.7% year-on-year (y-o-y) real GDP in crease in Q312, we reaffirm our cautious outlook for the Albanian economy in 2013 and 2014. Although the Q312 figures represent a significant improvement from the -0.2% y-o-y real GDP growth rate recorded in Q112, they remain well below the 4.8% average growth rate achieved between 2005 and 2011. Over the next few quarters, we believe the potential for a more robust economic recovery will be undermined by the ongoing crisis in the eurozone, weak domestic demand and the government's increasingly hefty public debt load, and forecast real GDP growth to be 1.5% in 2013 and 2.8% in 2014.
TABLE: ECONOMIC ACTIVITY
Monetary Policy
Easing Inflation Points Toward Interest Rate Fall
- We expect the central bank to lower Albania's policy interest rate by 50bps to 3.5% in 2013, as subsiding inflationary pressures and a bleak economic growth outlook shift the bank's focus towards tackling subdued domestic demand. As we anticipated (see our online service, 'Rising CPI Points To Interest Rate Freeze', October 24), the Bank of Albania held interest rates steady at 4.00% in Q412, having cut the interest rate five times in the 12 months leading up to September 2012. With the Albanian economy recording better than expected inflation figures in Q412, we expect price stability to play a smaller role in the development of Albanian monetary policy in H112.
Balance Of Payments
Current Account Deficit To Narrow, But Remain Hefty
- While we believe Albania will continue running a sizeable current account deficit for the foreseeable future, better than expected data released by the Bank of Albania (BoA) has prompted us to revise our current account deficit forecast to 9.1% in 2013 and 8.7% in 2014, from 9.4% and 9.0% previously. In Q312, the current account deficit fell by 18.5% y-o-y, and the cumulative deficit was down 12.8% y-o-y in the year-to-September. While the country's balance of payments position will continue improving as export growth picks up in 2013 , the contracting trade deficit will be insufficient to balance the cu rrent account by 2022 (the end of our forecast period). 16
TABLE: MONETARY POLICY
TABLE: CURRENT ACCOUNT
Chapter 3: 10-Year Forecast
The Albanian Economy To 2022
Regional Outlook Weighs On Trend Growth
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Full Table of Contents is available at:
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