Standard & Poor’s changes its rating on the Albanian economy

Standard & Poor’s changes its rating on the Albanian economy

IBNA Special Report

Tirana, October 13, 2014/Independent Balkan News Agency

By Edison Kurani

Rating agency Standard & Poor’s, has reviewed its rating for the Albanian economy by changing it from sustainable to positive, confirming at the same time the B/B level of ranking. Thus, from a B, Albania is given a B+, which means going up from a sustainable level of economy to a positive one.

This shift from a “sustainable” to a “positive” economy for the Albanian economy is seen by prime minister Edi Rama, as “very good news”. According to him, “this means that economic growth has started”.

“After we shifted the economy from a negative state to a sustainable one, the new rating of Standard & Poor’s on Albania changes from sustainable to positive”, says Mr. Rama.

Data of Standard & Poor’s

For 2013, the agency’s rating on the finances was negative. This year, the rating has changed on Friday from sustainable to positive, moving up from B to B+.

Standard & Poor’s has also reviewed its forecasts on the economic growth for 2015 and 2016 on Albania, by predicting a growth.

“The new government which entered office in the fall of 2013, is moving forward with its ambitious agenda of reforms, which aim at strengthening financial institutions and the management of the financial public sector and reduction of fiscal risk. After recently approving the pension reform, the government now faces a very difficult task of reforming the energy sector during the months to come. The agreements reached with the IMF at the start of 2014, act as a warranty for the necessary reforms of the government, along with financial support”, says the report.

The agency has also kept the assessment for public debt unchanged for 2017, at a level of 61% and praises the engagement of the government to advance structural reforms especially in the legal system, as the EU decided in June of this year to grant the country the EU candidate status.

Finances motivated by the new rating

Ministry of Finance feels motivated by this new rating. “The new rating on the Albanian economy reflects our projection for the reduction of the deficit by 2% of GDP in 2017”, reads the press statement of the Ministry of Finance.

He says that the main source of the growth may relate to exports along with foreign direct investments.

“The report praises the aggressive and determined advancement of the government to pay arrears. In relation to the projection for the future, the report says that the current positive rating offers a better chance for Albania’s ranking to go up in the 12 months to come, alongside holding structural reforms in key sectors”, says the declaration issued by the Ministry of Finance.

Ahmetaj: We’re in the right direction

Meanwhile, the Minister of Economic Development, Trade and Enterprise, Arben Ahmetaj says that Standard & Poor’s has positively rated for the second time the work of the government in the path of reforms and economic performance.

“As we announced in February of this year, Standard & Poor’s has once again praised the work of the government in its path of reforms and economic performance, based on sustainable growth”, says Mr. Ahmetaj.

He adds that “the shift of rating from a sustainable economy to a positive one shows that we’re in the right direction”.

Allies are satisfied

Socialist Movement for Integration, an ally in the government of prime minister Rama, is happy with this new rating of Standard & Poor’s. The vice chairman and head of SMI parliamentary group, Petrit Vasili says that the rating of Standard & Poor’s is a clear proof of a positive and promising economic performance.

“This rating means that we have all the prerogatives for a positive performance and where the lending levels, levels of support for the Albanian economy and encouragement of foreign domestic and foreign investments receive good news and an important positive signal. This is a very significant signal for a very good economic future, which generates growth, employment and better living standards for the citizens”, says Mr. Vasili.

He says that this signal has two important sides: “It’s a very positive stimulus, but also a call to continue with maximum engagement with the reforms”.

Opposition is skeptic

The opposition criticized the trumpeting done to the rating of Standard & Poor’s, saying that the government propaganda doesn’t replace the economic fall of the country. The democrat MP, Jorida Tabaku says that reality indicates the opposite: “The economy is falling, in spite of this rating. One in three Albanians is in debt and unemployment has touched the 17% figure in the most important sectors”, says Tabaku.

“The government, which tries to hide itself behind statistical data, with the aim of not being humiliated in front of the public, doesn’t see that incomes for 95% of the citizens have fallen, obliging them to drop consumption and increase debt”, says Tabaku.

She says that “unemployment has reached alarming levels of 17%, mainly in the sectors of construction and industry, which should have been the pillars of the economy”.

Under these circumstances, the opposition suggests a reviewing of the fiscal situation: “We’re in a national emergency which must be overcome and for this, there’s only one way: an immediate drop in taxes and a more friendly business climate”.

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Standard & Poor’s is an agency based in the United States of America and is considered as one of the important ones in the world for the assessment of the economic performances of countries. The agency is known to rigorously assess the most developed economies of the world and Europe in particular. The public is familiar with the negative rating that this agency has done to the economies of France, Italy and other countries.

The ratings of Standard & Poor’s have a world importance and this agency is considered to be the main source for all of those who collaborate in economic policies in the countries being rated.

When the ratings of Standard & Poor’s are positive, governments trumpet the ratings.

When they are negative, they are left on the shadow and they are considered as unacceptable and abusive in some cases.

In one of the negative ratings that the agency has previously produced, the high officials pointed out the fact that the US Department of State had pressed charges against Standard & Poor’s, claiming that it had committed fraud through ratings between 2004 and 2007, by stimulating the economic crisis. /ibna/