The International Monetary Fund ( IMF) gave on Wednesday a less optimistic forecast of Albania's GDP growth for this year and cautioned Tirana a budget cut like last year was imperative.
"Economic growth in 2010 is estimated at 3.5 percent, and we project it to decelerate further to 2 2/3 percent in 2011, due to lackluster domestic demand and moderating exports,"the IMF's visiting team chief Gerwin Bell said.
"Over the medium term, given catch-up potential remains and past investment in infrastructure is coming on line, growth could recover to some 4 percent, with some improvements in external sustainability," Bell added.
Like many other countries, the levels of growth in Albania, though respectable, are considerably below the previous decade's average of 6 percent, he said.
"And this is also subject to downside risks, including those stemming from the high level of public debt," IMF's Bell told a news conference along with Albanian Finance Minister Ridvan Bode.
Due to the fact that the budget finds itself again under pressure like last year from less revenue collection, the IMF advised Albania to cut spending and even consider raising taxes, but Bode ruled out raising taxes.
"As was the case last year, another mid-year budget review is thus imperative. It should target cuts of some 1.5 percent of GDP (20 billion lek, or 204.29 million U.S. dollars). Moreover, further consolidation efforts will be required in the following years," Bell said.
On current trends and policies, the deficit is projected to rise to 4 2/3 percent of GDP in 2011 and above 5 percent in the medium term, the IMF said. Bode said Albania will go ahead with the budget cuts to keep the deficit at 3.5 percent.