Falling Remittances: The Impact On Growth

In the inaugural Albania Business Forecast Report, we focus on the key challenges threatening to undermine the Western Balkan state's political and economic risk profile through 2010. While Tirana's recent accession into NATO and a broad cross-party consensus in favour of EU membership should act as a policy anchor through the medium term, we caution that 2009's recession (we forecast real GDP contracting by 2.0%) poses a considerable risk to economic policy formation, particularly as unemployment spikes to a multi-year high of 16.0% by end-year. Moreover, while the risks of a financial crisis emanating from the domestic banking sector remain low, we caution that a marked deterioration in asset quality through 2010 will inevitably lead to a further slowdown in loan growth, which will ensure that Albania's economic recovery through 2013 takes place at a lower trajectory than pre-crisis levels.

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