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Opinion / Editorial

Why does Moody's rate us?

Why does Moody's rate us?

On April 19, 2024, the "Moody's" international debt rating agency changed Albania's outlook from "stable" to "positive". The setting of our economy as a "positive" economy and not just a "sustainable" one, reflects for the agency the possibility of a better fiscal scenario than what the agency expected for our country. In other words, Moody's believes in a sustainable improvement of Albania's fiscal strength. Moody's rating on April 19 comes after the best ranking that the other well-known global debt rating agency "Standard & Poor's" gave us on March 22, 2024. On that day, "Standard & Poor's" increased its rating for Albania from grade "B+", which was six months ago, to grade "BB-". Both agencies are clearly convinced that our economy has made significant strides forward. While the first, the measurement of our public debt for the past year lowers even more from the government result of 59.2 percent of national product, to 58.2 percent, Moody's points out that the ratio of public debt to national product (GDP) returned on a steady downward trajectory since 2022. It zeroed out in 2022 the increase in debt over the period 2019-2021, where we suffered the earthquake and the pandemic. Moody's expects our debt-to-GDP ratio to decrease to 56.3 percent this year, from 59.2 percent in 2023. Beyond 2024, Moody's expects Albania's debt-to-GDP ratio to decline steadily, thanks to of the prime balance (income over current expenses) expected surplus for this year and of a stable economic growth in the years to come. Moody's also expects our government to comply with the fiscal rules set forth in the Organic Law on the State Budget, which include a positive primary balance and a reduction in the level of public debt to national production each year, until the debt reaches the level of disturbing 45 percent of the national production. The agency is of the opinion that the debt reduction is expected to come from ongoing fiscal reforms, including the medium-term strategy of the State's income and improvements in the management of public investments. The positive impact of these reforms may even exceed the current expectations of the agency itself, Moody's points out. She estimates that the recent significant improvement in the current account balance (one year's expenditures and income) is expected to be structural, strongly supported by the tourism boom and the strong growth of emigrant remittances and foreign direct investment. . Moody's is of the opinion that stable foreign direct investment flows in tourism and energy, improvements in productivity, as well as increased labor force participation, support a positive medium-term economic outlook for Albania. For these reasons,it predicts a real economic growth for us of 3.5 percent for this year. According to Moody's findings, our banking system remains strong and highly liquid, while the country's central bank, the Bank of Albania, is doing a good job in controlling inflation. The agency considers that Albania's credit profile (its debt-paying ability) will also benefit from the gradual implementation of further reforms related to the process of membership in the European Union. The pace of reforms is likely to strengthen as EU accession talks progress. Moody's says that further economic integration with the EU, Albania's largest trading partner, is likely to improve the growth potential of its economy in the medium term. This integration, according to the agency, will further narrow the gap in the income levels of the citizens of Albania, in relation to the incomes of citizens in the member countries of the European Union. Moody's is convinced that the Reform and Growth Plan for the Western Balkans, which was approved by the European Commission in November 2023, with financial support from the EU IPA pre-accession funds and investments, within the Balkan Investment Framework Western, will support the implementation of further institutional reforms in Albania. From the three major world agencies for evaluating the debt-paying ability of different countries, "Standard & Poor's", Moody's and Finch Rating, the first two have given assessments for our economy in the last two decades and for this year, so that both have significantly increased the ranking and forecasts for the economy of our country.From the three major world agencies for evaluating the debt-paying ability of different countries, "Standard & Poor's", Moody's and Finch Rating, the first two have given assessments for our economy in the last two decades and for this year, so that both have significantly increased the ranking and forecasts for the economy of our country.From the three major world agencies for assessing the debt-paying ability of different countries, "Standard & Poor's", Moody's and Finch Rating, the first two have given assessments for our economy in the last two decades and for this year, so that both have significantly increased the ranking and forecasts for the economy of our country.