08.07.2021 – 07:58
The Vienna Institute for International Economic Studies improved expectations for increased Gross Domestic Product this year and in the next two years.
In the new projections for 23 countries of Central, Eastern and South-Eastern Europe, including Albania, the institute revised the projections for the economies of 20 countries.
Albania’s economy will grow by 5 percent in 2021 from the 4.5 percent forecast for April 2021.
“The mass vaccination campaign launched in March has had the desired effect and the number of COVID-19 cases has dropped significantly. However, there are negative risks from new variants of the virus and from the influx of tourists. The Socialist Party emerged victorious from the April 2021 elections and will govern the country for a third term. This means a certain stability and the continuation of some infrastructure projects that will attract investment. Thus, we have improved our growth forecast for 2021 from 4.5% to 5%, and for the next two years to over 4%, “the official statement of the Vienna Institute for International Economic Studies argues.
They further analyzed the performance of the Albanian economy in the first quarter of 2021. Growth accelerated to 5.5% in the first quarter of 2021. Exports of goods increased by 35% in the first four months of 2021, while exports of services marked growth mainly from tourism, which this year will rely on visitors from neighboring countries.
A new wave of COVID-19 and premature fiscal tightening are key risks to recovery.
In the new summer forecast, the Institute expects the 23 Central, Eastern and Southeastern European economies (CESEE) to grow by 4.2% in 2021, an upward revision of 0.4% compared to the April forecast.
Despite its deplorable state of health, the Southeast European Region closed 2020 much better than expected to start a pandemic last spring.
Growth in CESEE will be driven mainly by private consumption. Consumption will be driven by savings accumulated by 2020 and bank lending. Business investments will also contribute, with companies launching new projects and those that had suspended them in 2020.
Employment is expected to increase in the second half of the year, while unemployment will decrease, but the decisive factor is expected to be the fiscal support provided by governments.
Inflation will be higher than previously expected, driven mainly by rising global energy and food prices. Average inflation in CESEE in May was 4.5%, the highest level in 2015. But high inflation will force central banks to raise their interest rates in 2021.
The main risk for economic recovery in CESEE is a new wave of COVID-19. Herd immunity will not be achieved in most CESEE countries, as vaccination is not fulfilling this mission. However, a new wave is unlikely to bring the same economic damage as previous waves. Economies across the region have learned to deal with the pandemic. Thus, a new wave of COVID-19 will only lead to a slowdown in growth, rather than a recession, analyzed the Vienna Institute for International Economic Studies. / Monitor