This report covers the main macroeconomic releases in Albania from February 5 to March 5, 2014, as well as the financial and political events that took place during this period. The report also summarizes industry news, including information on the Trans Adriatic Pipeline (TAP) project.

The International Monetary Fund (IMF) has agreed to provide Albania a EUR 331mn credit to support the authorities’ reform programme. The three-year agreement, approved by the IMF executive board on February 28, will help the country meet its external financing needs while providing the necessary support to strengthen fiscal and debt sustainability, lower public financing risks and put the economy on a sustained mid-term growth plan. The financial support was requested by the Albanian government in order to enable clearance of arrears and unpaid bills toward the private sector.

Albania’s public debt rose by 6.8% on the year to ALL 884.9bn (EUR 6.3bn) at the end of 2013. The debt was equal to 65.2% of full-year GDP, up by 2.7percentage points year on year. The IMF, the World Bank and the EBRD have repeatedly warned that the Albanian economy faces increasing challenges from its high public debt, which exceeds its statutory limit of 60% of GDP. The international institutions believe that the relatively high level of indebtedness is putting pressure on the country’s economic growth prospects, while limiting the room for fiscal manoeuvres.

Key Points:

• In industry news, the Albanian government has said it expects the implementation of the Trans Adriatic Pipeline (TAP) project to create thousands of new jobs. TAP is designed to transport gas from Azerbaijan via Greece and Albania and across the Adriatic Sea to Italy and Western Europe.

• In the first month of 2014, Albania’s general budget posted a surplus of ALL 2.3bn, swinging from a deficit of ALL 0.2bn a year earlier, mainly thanks to lower budget spending. The government expects the budget deficit to widen to 6.5% of GDP in 2014, up from 4.9% estimated for 2013.

• The foreign trade gap, on the other hand, expanded by 3.6% year on year in January 2014 and accounted for 1.2% of the full-year GDP forecast. The higher deficit came as exports decreased by 1.5% year on year, while imports picked up by 0.9% year on year.

• Consumer price inflation in the country eased to 1.7% in January from 1.9% in December, with the overall trend again determined by food prices, which grew 2.7% year on year slower than December’s hike of 3.5%.