IMF raises the alarm: Albania at risk of a financial collapse

by Alfred Kola

The crisis in neighboring Greece and Italy may push Albania into a severe financial crisis - IMF concludes in a report on Albania's economic progress on Monday.

“Albania has large trade, labor-market and banking system links with Italy and Greece. Especially the two latter links may result in substantial spillovers with banking system contagion potentially the most severe short-term risk, while sharply lower remittances could result in a significant GDP shock” – says the report

Unpaid bank loans rose six times from 3% before the crises started to currently 18%.  

The budget has been wrong-footed by slowing growth, resulting in a stop-and go policy. The budget cuts boosted a rise in payment arrears of some 0.7 percent and the government may not be able to pay the companies that carry out public works.

Public debt has drifted up, heightening near-term rollover risk and constraining flexibility. Debt is approaching 60% of GDP statutory limit, a relatively high level compared with emerging markets (average 47%) and regional peers. – says the report

IMF has warned in its report what we in respublica.al have been telling for months about the risk of Albania's financial collapse due mostly to the crisis in Greece and Italy and the soaring level of public debt. (look here for article) .