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INVESTING IN ALBANIA
Austrian Federal Economic Chamber
Vienna
May 12, 2014
Ellen Goldstein
World Bank Country Director
for Southeast Europe
Key Messages
Location, labor costs, endowments and reforms make investing
in Albania a good opportunity!
Boosting investment for growth and jobs will require a sustained
reform effort over the medium-term.
Macro-fiscal adjustment, improving the investment climate,
increasing connectedness, building “new economy” skills are key
Integration into the European economic bloc will drive a powerful
convergence towards greater prosperity in Albania
Location: next to the world’s largest and
most connected economic bloc
Note: Map resized according to economic strength
Labor costs: significantly lower than the rest of Europe
but higher than fast-growing Asia
0
200
400
600
800
1000
1200
Natural Endowments: rich in hydropower and
tourism potential
#4 in top 50 places to go in 2014
Hydropower potential of about
4500 MW of which only 1700
MW (35%) installed.
Global connectedness: below Europe and
fast-growing Asia…but starting to catch up
0
10
20
30
40
50
60
70
80
90
Albania Bosnia andHerzegovina
FYRMacedonia
Serbia EU11 EU15 Singapore
2007 2011
Global connectedness score, 0-100
Source: DHL
Exports remain a small share of national income
relative to Europe and fast-growing Asia
0
50
100
150
200
250
Kosovo
BiH
Alb
ania
Se
rbia
Mo
nte
ne
gro
Ma
ce
do
nia
, F
YR
Pa
nam
a
Ma
laysia
Ire
lan
d
Sin
gap
ore
Exports of goods and services (% of GDP)
EU
Non-EU
Balkan
Other
Exports destination
Share of migrant stock in source region population
Source: Based on UN International Migrant Stocks (2013 revision)
… but Albania is a world leader in exporting people
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Rest of the World Western Balkans Albania
1990 2000 2010 2013
EXPLOITING OPPORTUNITIES,
OVERCOMING CHALLENGES
Investing in Albania
Priority 1- Putting the macro-economic
and fiscal house in order
5.0
6.0
7.7
3.3 3.5 3.0
1.6
0.7
-3.2 -3.8
-5.6
-7.1
-3.0 -3.5 -3.4
-6.2
-8
-6
-4
-2
0
2
4
6
8
10
2006 2007 2008 2009 2010 2011 2012 2013e
Fiscal balance (excl. arrears), % GDP
Real growth, % Fiscal balance excluding arrears, % of GDP
53.4 54.7
59.3 57.8
58.6
60.6
70.5
40
45
50
55
60
65
70
75
2007 2008 2009 2010 2011 2012 2013e
Public debt, % GDP
Source: World Bank staff calculations Source: World Bank staff calculations
Large fiscal deficits and
accumulation of arrears… … drove up public debt
70.5 69.7 68.4
65.1
62.5
59.8
70.5
73.2
76.0 77.0
79.1 81.5
50
55
60
65
70
75
80
85
2013 2014 2015 2016 2017 2018
Combined tax and pension reforms Low growth no reform
Source: World Bank staff calculations
Serious fiscal reforms needed to
stabilize public debt in the medium-term
Debt to
GD
P r
atio
Top 10: progress on macroeconomic and fiscal reforms
Agreed medium-term macro-fiscal framework with IMF/WB
Adopted public sector arrears clearance & prevention strategy
Cleared arrears of Eur 174 million by end-April
Set commitment controls to avoid re-accumulation of arrears
Improved electricity billing for non-metered households
Enhanced revenue mobilization through tax policy and administration
Launched public consultations on 2014 revision of Pension Law
Adopted risk-based banking supervision system
Strengthened deposit insurance system
Expedited resolution of non-performing loans in banking sector
Priority 2 – Improve the Investment Climate
and Global Connectedness
131
90
89
72
71
54
44
25
1 189
Bosnia and Herzegovina
Albania
Croatia
Greece
Regional Average (ECA)
Hungary
Montenegro
Macedonia, FYR
Albania in the mediocre middle in global rankings of “Doing Business”
Mixed performance on 10 Doing Business areas
Starting a Business (76th)
Dealing with ConstructionPermits (189th)
Getting Electricity (158th)
Registering Property (119th)
Getting Credit (13th)
Protecting Investors (14th)
Paying Taxes (146th)
Trading Across Borders (85th)
Enforcing Contracts (124th)
Resolving Insolvency (62nd)
Regional average (ECA) Albania
Priority 3 – Improve energy sector performance
Technical and “non-technical” losses are
more than 40 percent of energy generated.
Priority 4 – Strengthening worker skills
for “new economy” jobs
340
360
380
400
420
440
460
480
Albania LAC Developing Asia Western Balkans ECA
Trend: Stagnating
Trend: Stagnating
Trend: Improving
Trend: Stagnating
Trend: Improving
PISA scores in math test, 2012
Source: PISA; Note: Developing Asia includes Indonesia, Malaysia, and Thailand
Western Balkans includes: Albania, Montenegro, Serbia
Gradual integration in the European economic bloc will
drive a powerful convergence toward greater prosperity