PRESS RELEASE
Preliminary Statement by the IMF Mission at the Conclusion of the Article IV Consultation to Albania

Strong policy stimulus softened the blow from the global crisis

1. In the face of strong headwinds, the Albanian economy has weathered the global crisis fairly well so far. Despite severe economic downturns and confidence shocks in much of Europe and other advanced economies, and associated drops in Albanian exports and remittances, Albanian GDP is estimated to have registered some 3 percent growth in 2009. Moreover, confidence in the financial sector has returned, as evidenced by the resumption of deposit growth. Meanwhile inflation expectations have remained well-contained and both remittances and exports begun to recover.

2. Fiscal and monetary stimuli were an important factor in explaining this favorable economic performance. In the budget, the full play of automatic stabilizers mainly the reduction of revenues was supplemented by major expenditure increases. Monetary policy provided timely support via two cuts in the policy rate and liquidity injections while the exchange rate served its function as a shock absorber. A record of prudent supervision and regulation helped ensure that banks entered the crisis in good shape and could rely on substantial solvency and liquidity buffers. These were further boosted by foreign parent-bank support. In addition, the impact of the crisis was mitigated through the limited importance of the export channel in Albania and its smaller reliance on market financing.

...but now buffers must be rebuilt and fiscal policy be pulled back in order to safeguard continued macroeconomic stability.

• Read the full text of the Preliminary Conclusion