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WB forecasts: Population decline and the poor quality of the workforce endanger the country's economy

2023-04-07 08:04:20Biznes SHKRUAR NGA REDAKSIA VOX
WB forecasts: Population decline and the poor quality of the workforce endanger
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Albania's economy throughout 2023 is at risk from high inflation rates, the inhibition of economic activity in the Eurozone and internally from concession contracts with Public-Private Partnerships (PPP), the World Bank announced in the spring projections for the countries of the ECA region (Eastern Europe and Central Asia).

The bank announced that the main challenge of the country is the declining population also due to large migration and the poor quality of the workforce.

The WB left the projection for Albania's economic growth unchanged. The GDP of our country will expand by 2.2% this year and by 3.4% next year, in the same values ​​as in the January forecasts.

The bank analyzes that the economic growth of our country is expected to be more restrained in 2023, in the context of global developments and tighter financial conditions.

The slowdown in Europe and the completion of earthquake reconstruction will also have an impact. Exports, consumption and investments will grow at lower rates than in the pre-pandemic period.

The inflation rate is expected to reach the target of 3 percent by 2025. The primary balance is expected to reach 0.7 percent of GDP only after 2023, in compliance with the fiscal rule.

Fiscal consolidation will come mainly from the expenditure side. On the revenue side, the government plans to impose a number of taxes provided for in the Medium-Term Fiscal Strategy.

Public debt is expected to fall slightly to 67.9 percent of GDP in 2023, as a result of higher nominal growth and a gradual reduction in the fiscal deficit.

The Bank analyzes that further increases in food and energy prices are the main risk for economic growth, as they can affect the decline of real disposable income, slow down poverty and limit the country's fiscal space.

Also, as a small, open economy, Albania is very exposed to external shocks.

While internal risks stem from natural disasters, public-private partnerships and state-owned enterprises, in addition to fiscal risks stemming from the energy sector.

The Albanian economy has shown considerable resilience in the face of successive shocks since 2019-2020.

During 2021-2022 the economy experienced a strong rebound in GDP growth that is fully recovering to pre-pandemic levels.

Real GDP expanded by 8.5 percent in 2021, surpassing the 2019 level by 4.7 percent and fully closing the output gap. Poverty levels continued their downward trend in 2022.

The sustainability of the Albanian economy was helped by proximity to the EU market, growing remittances and exports.

Hydropower plants, which meet 85 percent of domestic energy demand in a year with average rainfall, have contributed positively and provided some insulation from the ongoing energy crisis.


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