Albania Economic Forecast

Year-on-year GDP growth accelerated to 3.2% in Q2 from 2.8% in Q1. Stronger domestic demand was behind the acceleration: Household and government spending and fixed capital formation all recorded faster annual increases than in the first quarter. On the flipside, exports swung from expansion to contraction. Turning to Q3, lower economic sentiment in the quarter amid subdued consumer confidence pointed to weakening activity. That said, a strong tourist season should have sustained external demand. On the fiscal front, the budget surplus more than tripled year on year in January-August, as revenue growth outpaced the increase in expenditure. In other news, in late September, S&P Global Ratings upgraded the country’s outlook to positive while affirming its ‘B+’ rating. The agency cited a stronger-than-expected improvement in fiscal metrics and an expanding tourism sector.

Inflation dropped to 4.0% in August from 4.2% in July. The result marked the lowest reading since February 2022 and was mainly driven by softer increases in prices for food and non-alcoholic beverages and recreation and culture. Inflation will average lower in 2023 than last year, thanks to cheaper energy and easing supply chain pressures.