"Albania, one of the fastest growing economies in Europe" - IMF Report: Fiscal discipline significantly reduced public debt
The Executive Board of the International Monetary Fund (IMF) has approved the report on Albania. The international financial institution assesses our country as "one of the fastest growing economies in Europe, thanks to a broadly appropriate macroeconomic policy mix."
The IMF notes that output is now well above its pre-pandemic trend thanks to a booming tourism sector. Fiscal discipline has led to a significant reduction in public debt, while proactive monetary policy has helped bring headline inflation below target. At the same time, external imbalances have narrowed significantly due to strong foreign exchange reserves, contributing to an external position that is assessed as stronger than implied by fundamentals. In this context, the government is advancing bold reforms to secure EU membership by 2030.
While the short-term outlook is positive, Albania's goal of income convergence with the EU will require overcoming gaps in structural reforms.
Meanwhile, the IMF recommends growth-friendly revenue reforms, improving tax expenditures, modernizing property tax systems, and improving tax administration, along with improvements in spending quality and fiscal transparency. On the other hand, well-targeted social assistance would support vulnerable households more effectively than planned monthly pension bonuses.
The IMF assesses that the Bank of Albania should be prepared to react quickly to evolving market conditions, while currency purchases should be limited to addressing non-fundamental fluctuations. With inflation expectations and core inflation close to target, the current monetary policy rate of 2.5 percent and the monetary policy stance close to neutral are appropriate.
According to the IMF, the recently activated borrower-based measures for new residential real estate loans are an important structural tool, while the availability of data on commercial real estate lending needs to be improved. The new development bank also requires strong governance and supervision.
The IMF stresses that comprehensive reforms will be needed to revive productivity and promote income convergence with the EU. Policies should focus on improving skills through broader training coverage and quality of education, creating high-quality jobs, increasing overall firm productivity, and improving the business environment through further governance reforms.
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