Boston, MA -- (SBWIRE) -- 10/02/2013 -- Core Views

We forecast real GDP growth of 2.1% in 2013 and 3.2% in 2014 in Albania, driven by a modest recovery in private consumption and healthy export growth. However, a more significant recovery will be restricted by the government's unfavourable fiscal position and weak fixed investment, which will ensure that growth remains below potential for some time to come.

Inflationary pressures will remain subdued over the coming months due to easing agricultural prices and low demand-pull price dynamics. We expect the National Bank of Albania (BoA) to lower its policy interest rate by 25bps to 3.25% by the end of 2013, as low prices allow the central bank to try to stimulate growth through adopting a more dovish monetary policy stance.

View Full Report Details and Table of Contents

Albania's current account deficit will narrow to 8.6% of GDP in 2013 and 8.2% in 2014, from 9.9% in 2012, as goods exports continue their gradual recovery and sluggish domestic demand restricts import growth. However, a faster correction in the country's current account will be undermined by weak external demand and Albania's modest economic recovery through 2014, which should prove supportive of imports. We believe the victory of the opposition Socialist Party in Albania's June parliamentary elections should increase the chances of the country being granted EU candidate status in 2013, after former Prime Minister Sali Berisha chose not to challenge the landslide victory. However, ongoing corruption and rising regional tensions will slow the country's political progress going forward, while ensuring that the full EU membership remains outside our 10-year forecast period.

Major Forecast Changes

Due to early signs that external and domestic demand is slowly picking up, we revise up our forecast for real GDP to expand by 2.1% in 2013 and 3.2% in 2014 in Albania, from 1.3% and 2.6% previously. We hold to our forecast for the central bank to lower the policy interest rate by a further 25bps to 3.25% by the end of 2013, but revise down our forecast for rates to be lowered to 2.50% in 2014, from 3.00% previously. The downgrade comes against the backdrop of increasingly dovish statements made by BoA Governor Ardian Fullani, who said the July interest rate cut was needed to 'create better conditions for the growth of domestic demand'.

We have downgraded our forecast for Albania's current account deficit to come in at 8.6% of GDP in 2013 and 8.2% in 2014, from 8.8% and 8.4% previously, against the backdrop of weaker than expected domestic demand restricting imports and export growth beginning to recover, implying a faster correction in the merchandise deficit going forward.

About Fast Market Research
Fast Market Research is an online aggregator and distributor of market research and business information. Representing the world's top research publishers and analysts, we provide quick and easy access to the best competitive intelligence available. Our unbiased, expert staff will help you find the right research to fit your requirements and your budget. For more information about these or related research reports, please visit our website at http://www.fastmr.com or call us at 1.800.844.8156.

Browse all Country Reports research reports at Fast Market Research

You may also be interested in these related reports:

- Estonia Business Forecast Report Q4 2013
- United States Business Forecast Report Q4 2013
- Bulgaria Business Forecast Report Q4 2013
- Slovakia Business Forecast Report Q4 2013
- Chile Business Forecast Report Q4 2013
- Philippines Business Forecast Report Q4 2013
- United Arab Emirates Business Forecast Report Q4 2013
- Hungary Business Forecast Report Q4 2013
- Iran Business Forecast Report Q4 2013
- Venezuela Business Forecast Report Q4 2013