This paper aims to determine how much of the economic slowdown of Albania is owing to cyclical conditions and how much to a reduction in potential growth. The analysis shows that average growth in 2009–14 dropped by 3.2 percentage points relative to 1997–2008, of which 2.8 percentage points are due to lower potential growth. Albania has significant potential to improve its export competitiveness. However, Albania’s competitiveness has shown narrow improvements over the past five years, with weak productivity growth and continued concentration in low-skilled labor-intensive sectors with limited value added. This paper also explores the factors underpinning Albania’s relatively low level of general government revenues.
company INSIG will contribute to lowering public debt. Lowering the debt ratio below 60 percent is one of the government’s key economic policy goals.
Remaining vulnerabilities require adequate action in line with program conditionality . Sustained action in broadening tax basis and reducing informality in the economy is yielding positive results in terms of business and employees registration, and the newly merged tax/customsriskunit is working well. The organizational reform of the tax administration (postponed to end-June in order to ensure an effective
incentivize customers to claim their tax receipts. To enhance enforcement, 500 new tax inspectors were hired. A steering committee monitors the effort on a weekly basis, and promotes closer collaboration between tax and customs administrations.
25. The compliance campaign should focus more on long-term outcomes, using expertise and new risk profiles from the joint tax and customsriskunit . The risk analysis from the newly merged tax/customsriskunit and operational intelligence has informed the compliance measures implemented in the informality campaign. These measures
This paper presents an overview of recent economic developments, outlook, and risks of the Albanian economy. Over the past few years, Albania has successfully maintained macroeconomic stability amid a turbulent external environment. A sizable fiscal consolidation is underway, and public debt is projected to start decreasing in 2016. However, growth remains sluggish due to a weak euro area recovery and risk-averse banks. The policy mix focuses on fiscal adjustment, while supporting growth through gradual monetary easing. The key policy priorities are to lower fiscal vulnerabilities through continued consolidation, revive private sector credit by cleaning up bank balance sheets, and continue implementing growth-friendly structural reforms.