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

THANK YOU

Ellen Goldstein

World Bank

Country Director for Southeast Europe

egoldstein@worldbank.org