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Investing.com -- S&P Global Ratings has upgraded Albania’s long-term credit rating from ’BB-’ to ’BB’, citing an improved fiscal position. The short-term rating remains at ’B’ and the outlook is stable. This upgrade, announced on March 21, 2025, reflects Albania’s robust economic prospects, underpinned by significant foreign direct investment (FDI), remittance inflows, and a booming service export sector.
The agency expects Albania’s real GDP growth to stay above 3% until 2028, driven by investment and consumption. The upgrade also takes into account the nation’s declining government debt and the success of its tourism sector. Gross general government debt has dropped by 10 percentage points of GDP since 2019, and service exports have more than doubled.
However, the country does face some challenges, including a shrinking workforce due to emigration and a declining birth rate. Despite these issues, S&P Global Ratings anticipates strong household spending and investment in energy, leisure, and real estate to drive GDP growth.
Albania’s government, led by the Socialist Party (SPA), is expected to maintain power after the May parliamentary elections. The SPA has consistently focused on economic growth and fiscal consolidation since its election in 2021.
The 2025 budget plans for a deficit of 2.6% of GDP, but S&P Global Ratings predicts it will be lower at 2.2%, due to the government’s history of underspending. Despite a decrease in debt levels, risks such as high foreign currency debt and rollover risks persist.
Albania’s Central Bank has intervened in the foreign currency market to alleviate pressures on the Albanian lek. The country’s current account deficit is expected to widen to 2.6% of GDP in 2025, up from 2.4% in 2024, due to a deteriorating trade balance and slowing tourism arrivals.
Albania’s banking sector is assessed as having limited contingent liabilities. The sector remains liquid, well-capitalized, and profitable, with a return on equity at 18.1% and a strong regulatory tier one capital ratio of 18.0% of risk-weighted assets as of Dec. 31, 2024. Nonperforming loans remain at a historic low of 4.2%, reflecting improved asset quality across the sector.
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