Hidden Bibliographic Details
| Other authors / contributors: | End, Nicolas, author, (IMF staff)
Ismail, Kareem, author, (IMF staff)
Thackray, Mick, author, (IMF staff)
International Monetary Fund, publisher.
International Monetary Fund. European Department, sponsoring body.
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| ISBN: | 9781484379097
1484379098
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| Notes: | "June 2016."
"May 12, 2016; approved by European Department; prepared by Ezequiel Cabezon, Nicolas End, Kareem Ismail, and Mick Thackray"--page 2 of pdf.
Includes bibliographical references.
Description based on online resource; title from pdf title page (IMF.org website, viewed June 21, 2016).
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| Summary: | Growth in Albania has slowed since the global financial crisis. This note aims to determine how much of the slowdown is due to cyclical conditions and how much to a reduction in potential growth. The analysis below shows that average growth in 2009-14 dropped by 3.2 percentage points relative to 1997-2008, of which 2.8 percentage points are due to lower potential growth. The first section of this note focuses on growth accounting to understand the drivers of growth. The second section looks at the medium term outlook. Finally, the third section estimates and discusses potential output. Albania has significant potential to improve its export competitiveness. It has proximity to both European and emerging markets, access to the Mediterranean, a young population relative to the rest of Europe, and natural resources that remain to be fully tapped. However, Albania's competitiveness has shown narrow improvements over the past 5 years, with weak productivity growth and continued concentration in low-skilled labor-intensive sectors with limited value added. Recently, the authorities have taken steps forward but need to accelerate efforts to encourage investment in higher value-added products by implementing further structural reforms to enhance the business environment, address infrastructure gaps, and improve labor skills. Increased exchange rate flexibility would also help support external re-alignment (see External Sector Assessment), which may further boost export growth. This note explores the factors underpinning Albania's relatively low level of general government revenues. The analysis finds that while tax rates and tax expenditures are comparable to regional standards, tax efficiency is low and declining, perhaps due to relatively high levels of noncompliance and informality. Past revenue underperformance in Albania also reflects overly optimistic projections. To address the compliance and evasion issues, policies need to focus on strengthening the cooperation between the tax and customs departments, enhancing performance monitoring and governance of tax administration and improving policy design to improve tax compliance.
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