Albanian economy faces headwinds from war in Ukraine
TIRANA (Albania), May 20 (SeeNews) – The war in Ukraine is negatively affecting the Albanian economy due to rising food and energy prices and increased external financing costs, which affects the public sector, said the International Monetary Fund (IMF).
Albania’s gross domestic product (GDP) is expected to grow by around 3% in 2022, supported by tourism and construction but moderated by the impact of rising prices, the IMF said in an end statement on Thursday. of mission.
Inflation is expected to remain elevated over the next few months before slowing to the 3% target in early 2024.
“The authorities reacted quickly to the latest shock, with some of the targeted and time-limited support measures. They made the right decision to avoid ad hoc tax cuts, which tend to disproportionately benefit the wealthy, can distort price signals, and are costly and difficult to reverse,” the IMF said.
Targeted support to the poor and vulnerable should continue to strengthen the country’s social protection system. However, any additional revenue beyond what is currently budgeted should be saved to rebuild policy space, the fund noted.
The IMF added that the central bank’s policy stance remains accommodative despite the increase in policy rates in March.
“Further hikes in policy rates are warranted to contain domestic inflationary pressures and bring inflation expectations back to target,” the fund said.
The IMF has also warned that an undue delay in tightening could later justify much larger increases in the policy rate to bring inflation back on target.
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