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Announcement:

Moody's affirms Albania's B1 rating with stable outlook

Global Credit Research - 26 Nov 2012

London, 26 November 2012 -- Moody's has today affirmed the B1 rating of Albania. The outlook remains stable.

Today's affirmation reflects the following key factors:

(1) Albania's economic resiliency throughout the financial and euro area debt crises as well as an improvement in its institutional capacity, mainly driven by its progression in the EU accession process.

(2) The credit constraints arising from high debt levels relative to its peers and uncertainties regarding the country's medium-term strategy for fiscal consolidation and debt reduction; part of this uncertainty stems from the upcoming parliamentary elections in 2013.

RATIONALE FOR AFFIRMING THE B1 RATING

The affirmation of Albania's B1 rating is based on the relative resiliency of economic growth to the financial and euro area crises, despite the small size and lack of diversification of its economy. Moody's notes, however, that growth has decelerated more recently and will remain subdued over the medium term given the removal of government's fiscal stimulus and the re-balancing of the economy towards exports in the context of poor growth prospects in Europe.

Moody's expects that progress within the EU accession process should continue to drive improvements in the country's institutional capacity. The assessment of Albania's institutional strength remains currently low primarily reflecting the country's still poor ranking in terms of the rule of law and the government's effectiveness (as calculated by the World Bank).

While Moody's recognises this economic resiliency and institution building, the country's rating is constrained by high debt levels and the relatively short-term maturity structure. Moreover, its fiscal flexibility both in terms of expenditure and revenue appears limited. Although it may regain some financial room in the course of next year, Moody's notes that uncertainties remain regarding the execution of the country's medium-term fiscal consolidation and debt-reduction plan, particularly as it pertains to the potential privatisation of oil company, Albpetrol, which would represent a major source of revenue. These uncertainties are only likely to be clarified after the parliamentary elections scheduled for Spring next year.

RATIONALE FOR MAINTAINING THE STABLE OUTLOOK

The stable outlook on the Albania's bond rating reflects a balance of upside and downside risks. While the EC's recent decision to recommend granting Albania candidate status under conditions is credit positive, high debt burden and uncertainties surrounding the fiscal consolidation plan constrain the rating. In the months following the elections, Moody's will assess whether these uncertainties remain and whether the rating outlook remains appropriate.

WHAT COULD MOVE THE RATING UP/DOWN

Although the government is addressing the economy's structural problems, more substantial progress would be needed before Moody's considers a ratings upgrade. Improvements in institution building -- including judicial efficiency and success in the tackling of corruption -- would be beneficial, as such shortcomings hamper investment. A fiscal plan placing the debt ratios on a downward trajectory in the medium term would also be a source of positive pressure on the rating.

Albania is currently at the top of the rating range as indicated by our sovereign bond rating methodology. Failure to execute its planned reform programme (both economic and institutional) could exert downward pressure on the rating. More immediately, a failure to secure fiscal consolidation and to contain debt growth over the medium term could exert downward pressure on the rating.

COUNTRY CEILINGS

Moody's has today revised both country ceilings for local-currency debt and deposits to Ba1 from respectively A3 and Baa1 previously. The ceiling for foreign-currency bonds has also been reassessed to Ba2 from Ba1 previously. The ceiling for foreign-currency deposits remains B2.

Moody's Local Currency Country Risk Ceilings determine the maximum credit rating achievable in local currency for a debt issuer domiciled in that country or for a structured note whose cash flows are generated from domestic assets or residents. Moody's foreign-currency country ceilings generally set the highest rating possible in a given country by denoting the risk that a government would interfere with a domiciled debtor's repayment of its foreign-currency-denominated bonds (the Foreign Currency Bond Ceiling) and deposits (the Foreign Currency Deposit Ceiling).

The principal methodology used in this rating was Sovereign Bond Ratings published in September 2008. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Lucie Villa
Analyst
Sovereign Risk Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Bart Oosterveld
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's affirms Albania's B1 rating with stable outlook
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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