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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT APRIL 2007
TIRANA STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Economic and Political Environment
A coalition of the Democratic Party of Albania
(DPA) and several smaller allies won the
parliamentary election on 3 July 2006. Since
coming to power the DPA leader and new
prime minister, Sali Berisha, vowed for deep
reforms mainly towards the integration of
Albania in the Euro-Atlantic structures,
improvement of judiciary system,
guaranteeing of free and fair electoral
process, respecting human rights,
decentralization of the local government as
well as declaring a war on corruption and
organized crime.
The implementation of such strong reforms
gave positive results in changing Albania’s
image the western countries and was finalized
with the endorsement of the Stabilization and
Association Agreement (SAA) with European
Union on June, 2006. Likewise, the Albanian
government is undertaking all the necessary
steps to make Albania the most attractive
country in the region regarding foreign direct
investments (FDIs) inflows. In this respect the
government unveiled its initiative called
“Albania 1 euro”, which intends to offer
extremely cheap facilities for all the FDIs
planning to invest in Albania. As far as
country’s foreign policy concerns, integration
to EU and NATO as well as the definition of
Kosovo’s final status in full compliance with
the UN and international factor
recommendations, will remain key goals under
the DPA-led government.
Albania has signed a new three-year IMF
Poverty Reduction and Growth Facility
(PRGF), which puts a stronger emphasis on
structural and institutional reforms, and on
improving the business environment. Within
this framework, the authorities will face the
challenge of tackling widespread poverty.
Public investment is likely to concentrate on
infrastructure, healthcare and education. In the
meantime, many other soft credit lines have
been signed between Albanian government
and World Bank, EBRD and many donors in
order to finance some strategic public
investments.
Economic Performance
According to international financial
organizations who supervise the financial
stability of the country (IMF and WB), Albania's
macroeconomic performance over the past
year has been good, with strong growth, large
inward remittances, and a significant reduction
in poverty. Macroeconomic stability has been
maintained–evidenced by low inflation,
decreasing debt, increasing confidence in the
currency and the banking system, and rising
international reserves. Although the current
account deficit has deteriorated somewhat,
the Albanian LEK (ALL) has continued to
strengthen, reflecting rising confidence and
declining risk premiums.
Albania has signed a new three-year IMF
Poverty Reduction and Growth Facility
(PRGF), which puts a stronger emphasis on
structural and institutional reforms, and on
improving the business environment. Within
this framework, the authorities will face the
challenge of tackling widespread poverty. In
the meantime, many soft credit lines have
been signed between Albanian government
and World Bank, EBRD and many donors in
order to finance some strategic public
investments. The expectation is for growth to
moderate slightly in 2006 (around 6%), but to
return to a faster pace in 2007 and over the
longer term. However, sustaining this pace will
require significant reforms to improve
infrastructure and institutional quality–including
governance and the rule of law. Such reforms
will enable Albania to attract the high-quality
investment needed to further develop the
export sector, which remains small. The
current rapid growth of financial intermediation
is a positive development, and necessary for
sustained high growth. Actions will be taken to
tighten gradually prudential regulations and
enhance banking supervision, to safeguard
loan quality. The banking system displays
satisfactory indicators of liquidity and
capitalization at the end of 2006. It continues
to realize a profitable activity, creating the
grounds for its expansion in the future. Credit
to economy has maintained its rapid growth
rates, although its annual growth rate results
to be lower than over 2005.
In November, Parliament passed the State
Budget for 2007. This budget is consistent
with the authorities' strategy of developing a
small but efficient government concentrated
on its core functions. Likewise, the main
priorities of the budget of 2007 will be towards
reforms regarding education, healthcare and
the legal system. Last but not least, during
2007, Government will be strongly focused on
the improvement of country’s infrastructure
through the successful realization of planed
public investments.*
* Information provided by the Tirana Stock Exchange
Key Information Contacts
Bank of Albania www.bankofalbania.org
Ministry of Finance www.minfin.gov.al
Albanian Institute of Statistics www.instat.gov.all
Albanian Securities Commission www.asc.gov.al
Ministry of Economy www.mete.gov.al
2004-ORIGINS OF GROSS DOMESTIC PRODUCT (%)
Agriculture, hunting, forestry
Construction
Industry
Trade, Hotels and Restaurants
Other services
19.5
12.5
20.5
9.0
20.8
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