In the latest report published on March 22, 2023, the credit rating agency “Standard & Poors” has improved the long-term rating of Albania’s sovereign credit to ‘BB-‘ from ‘B+’, emphasizing the improvement of the fiscal position and the external position of the country. This rating improvement comes as a recognition of Albania’s economic stability and prudent management of public finances in the face of a series of successive challenges.
The agency estimates that Albania has consistently demonstrated its ability to withstand shocks, including the 2019 earthquake, the COVID-19 pandemic and the indirect macroeconomic effects of the Russia-Ukraine war. Despite these obstacles, the agency estimates that Albania’s economy has grown at an impressive average of 5.8% per year over the past three years, while simultaneously improving public finance parameters.
The agency attributes this economic resilience, in part, to a significant increase in tourism. This boom in the tourism sector helped Albania increase service exports by nearly 15% of GDP between 2019 and 2023, significantly strengthening its external position, S&P estimates.
Moreover, the agency notes that the Albanian authorities have shown their commitment to fiscal consolidation. Combined with strong economic growth, these efforts have led to a significant reduction in public debt, from a peak of 74.5% of GDP in 2020 to an estimated 58% in 2023. The agency predicts that the authorities will aim to maintain this prudent approach to public finances, in accordance with the Organic Budget Law, ensuring that Albania’s public debt remains stable at an average of around 55% of GDP during the years 2024– 2027.
In addition to the improved fiscal position, Standard&Poor’s estimates that Albania has also strengthened its external balance. This is attributed to the accumulation of public assets, mainly foreign exchange reserves, and growing service revenues from the developing tourism sector.
The agency predicts that Albania’s moderate growth prospects and relatively high reserves provide a hedge against potential external shocks.
S&P also expects the authorities to remain fiscally prudent, keeping public debt on a stable and gradually declining trajectory.
The agency estimates that Albania will take institutional steps in support of its bid for EU membership by 2030. The country has implemented a series of reforms to overcome infrastructure obstacles, further aligning the legal framework, driven by its ambition to join the EU. However, internal challenges require continuous structural reforms to harmonize with the EU acquis.
