TIRANA, January 6, 2012 - Global growth slowed down in 2011 and economic outlook for Europe has deteriorated considerably following the deepening euro area crisis. The Western Balkans region is very sensitive to overall economic growth in the European Union, its largest trade partner. It is further vulnerable to changes in monetary and financial conditions in European countries whose banks are the dominant asset holders in Western Balkan countries. Remittances flows into Albania and Bosnia and Herzegovina are equivalent to about 10 percent of GDP and these flows have been already affected by a slowdown in euro-zone economic growth.
In this environment of growing external risks and economic uncertainties, the World Bank has increased the availability of its financing to several countries of the Western Balkans. This means that the World Bank can now offer a higher financing support for these countries in the two coming years (2012 and 2013) than the envelope foreseen in the current Country Partnership Strategies.
The main objective of the increased lending envelope for Western Balkan countries, including Albania, is to help them prepare for and effectively respond to external shocks, while at the same time preserving focus on structural reforms and social safety nets which are essential for maintaining sustainable growth. In the context of Albania, the World Bank is already engaged with the Government in preparing the development policy loan on governance and competitiveness, which can use additional financial resources to strengthen the program of economic reforms. The Government of Albania will be also able to use additional World Bank assistance to reduce fiscal vulnerabilities and help safeguard economic and financial stability for continued growth and job creation.
Currently, the World Bank and the Government of Albania are at a preliminary stage of discussions about the use of an increased financing envelope. A group of World Bank experts will visit Albania next week to discuss and identify with government partners specific areas for expanding support to economic reforms, preparedness for external shocks, stability and growth.