|KQZ, RBI/Raiffeisen Research|
|KQZ, RBI/Raiffeisen Research|
Absolute majority for the Socialist Party
The opinion polls were right in predicting the victory for the incumbent Socialist Party and the prime minister Edi Rama in the elections held on Sunday. The exit polls, released after the polls closed at 19.00, were less so indicating a hung parliament. After more than 90% of the votes were counted the Socialist Party won an unprecedented third election with an absolute majority of 73-74 deputies out of 140, or 48.6% of the total votes.
Reforms needed to advance EU negotiations
The opposition Democratic Party has not conceded yet and might challenge the results in different ways. We could face months of protracted battle, but it does not seem to be any path for the opposition to overturn the election.
Anyway, assuming that the results will be held by the courts and the opposition will adopt peaceful ways and accept the results the program of the Socialist Party will be focused on the integration in EU with the first intergovernmental conference expected to be held within 2021. The speed of the opening of the chapters will depend on Albania’s advancement with the reforms as well as the appetite and the public mood of EU countries for further enlargement which we forecast to be still negative in the years to come.
The advancement of political, judicial and economic reforms will be crucial for the country to close the gap with EU in terms of economic prosperity.
Infrastructure key to close the gap with Europe
The economic program of the Socialist Party focuses on the current vision for the economic development based on the large public investments. It has promised to raise the minimal wage from ALL 30 thousand to ALL 40 thousand by the end of the next election, revise the progressive tax (0% up to ALL 40 thousand and taxation range for the 23% bracket will move up above ALL 200 thousand), support for manufacturers through fiscal facilities and a credit fund of EUR 10 million. In addition, the Prime Minister has declared there will not be a tax cut for large enterprises, currently at 15%.
Infrastructure will be key in the forthcoming years. There are projects for two new airports beside the Kukes airport almost completed. The port of Durres together with that of Vlora, Saranda and Shengjin are four new or renovated ports that will transform the capacities of the country to bring in tourists.
The master plan Port of Durrës was presented during the election campaign and the new tourist port is expected to be the largest in the Balkans, in which the company Emaar Group will invest EUR 2 billion. The government will also focus on the construction of Vlora and Saranda airports.
Incentives to focus on transformation of industry
The transformation of production lines through investments in new technology will be supported, with fiscal incentive for accelerated depreciation. This should ease the tax burden and companies will increase liquidity. There will also a guarantee instrument of 50 million euro for the manufacturing to cover the costs of replacement and transfer to new production lines.
The electoral promises are usually discounted by reality in Albania; therefore it remains to be seen how much can be accomplished in the forthcoming years.
Fjorent is the head of ALM & Research for Raiffeisen Bank Albania. After a MSc in International Business from the University of Trieste and an MBA from MIB School of Management in Italy he started as an Investor Relations financial analyst at the aerospace & defense company Leonardo in Rome. After that he moved to the Italian Stock Exchange in Milan promoting blue chip companies through roadshows with institutional investors and after the merger with London Stock Exchange was in charge of primary markets of potential to be listed companies in Eastern Europe. In 2011 moved back to his native country to join Raiffeisen Bank in ALM & Research team in charge of fund transfer pricing, liquidity management and IRRBB. After a period at Intesa Sanpaolo Bank Albania as Head of pricing starting from 2021 he is heading the ALM & Research of Raiffeisen Bank Albania. Apart from macroeconomic analysis of particular interest for him is the disruptive technological transformation impacting the banking system. Fjorent’s hobby is football and he enjoys theatre and has been an amateur player as a teenager.
The first GDP data for Q1'21 will provide an account of the economic development at the beginning of the year. The results will be very different for the individual countries and will be a reflection of the extent of the business restrictions. The upcoming central bank meetings (USA, Hungary) will not bring any new impulses. In contrast, the Russian Central Bank hiked boldly by 50bp at the end of this week. Also worth to mention: Geopolitical risks in the CEE region have calmed down this week as the Russian army was ordered back from the Ukrainian boarder.