Following a remote visit to Albania from the International Monetary Fund, they have concluded that economic recovery is underway, albeit subject to “considerable uncertainty over the evolution of the pandemic.”
The delegation, led by Yan Sun, conducted a remote visit between 7 and 11 June. They found that the 2021 fiscal policy is providing adequate support for the economy. However, spending initiatives by the authorities should be supported by revenue-enhancing measures to provide a “credible medium-term fiscal consolidation”.
Sun said that Albania’s economic activity contracted by far less than originally anticipated, due to strong domestic and regional tourism, policy support, earthquake reconstruction and the fact there was not a second COVID-19 lockdown.
She added that growth is expected to rebound at 5.3% due to the recovery of pandemic-affected sectors and ongoing reconstruction following the earthquake.
Uncertainty over the growth outlook remains considerable she said. The government should scale back on “overly-ambitious domestically-financed public investment” and should instead focus on funding social protection, healthcare (such as vaccination), earthquake reconstruction and contingency buffers.
“To help rebuild room for fiscal policy maneuver once the recovery is on a firm path, planned policy initiatives by the Albanian authorities should be consistent with moving toward a positive fiscal primary balance by 2023 and be supported by a credible medium-term budget framework,” she said.
The government must pursue monetary reforms with “great vigor” including monitoring and managing rising risks such as public-private partnerships, state-owned enterprises, and government guarantees.
They IMF also noted the use of “restrictive tender procedures for reconstruction” saying they should cease and funds should be subject to adequate public financial management controls.