Albania’s economy is facing pressures as a result of the war in Ukraine, through the immediate rise in prices and further tightening of global financial conditions, the IMF report says, after concluding the visit of the team sent to Tirana.

Yan Sun, who led the International Monetary Fund team, noted that the sharp rise in energy and food prices, as well as rising external financing costs due to the war in Ukraine, represent the third blow to Albania’s economy in years.

The IMF forecasts economic growth of 3 percent in 2020, supported by tourism and construction, but weakened by the impact of rising prices.

Inflation is also expected to remain high in the coming months, driven by import prices, before returning to target again in early 2024, reflecting the impact of monetary policy tightening.

Sun appreciates the authorities’ quick response to the recent crackdown and some of the support measures taken are well-oriented and time-limited.

“The authorities have made a fair decision that they have avoided temporary tax cuts, which bring benefits indirectly to those who are better off economically, can distort price signals, are costly and difficult to undo.

“Given the challenges of the transparency board that monitors the prices of some basic food items, we see fit to replace it with well-oriented support for the poor and the exposed in order to protect them from the effects of rising prices.”

The IMF instructs to provide more targeted support to those in need and those who are most exposed to protect them from inflation.

“This should be enabled within the level of existing budget expenditures for 2022 through redistribution. “Saving potential revenues collected over the plan, as well as a credible consolidation from the revenue side in the medium term, are essential for recreating the necessary space for fiscal policy.”

Monetary policy needs to be tightened more and in time, in order to curb inflationary pressures and to reorient inflation expectations within the Bank of Albania’s target, the report further states.