Albania's B1 government bond rating incorporates the country's key credit challenges, which relate to its high, albeit declining, government debt ratio, says Moody's Investors Service in its annual credit analysis report on the country.

"We expect Albania's government debt ratio to reach around 69% of GDP in 2017," says Evan Wohlmann, Assistant Vice President at Moody's. "It also faces sizeable gross borrowing requirements given its large domestic roll-over needs," underlined report.

Furthermore, the government continues to rely on liquidity from a domestic banking system burdened by significant non-performing loans to finance itself.

More positively, though, ongoing administrative and judicial reform efforts in pursuit of European Union (EU) accession should lead to notable improvements in the country's business environment, according to Moody's.

The recommendation by the European Commission to open formal accession negotiations, conditional on judicial reform implementation, reflects Albania's progress on addressing corruption and advancing public sector reform.

In addition, continued progress on Albania's comprehensive power sector reforms, with World Bank support, is expected to help prevent a renewed build-up of arrears and support economic growth in the medium term, according to the rating agency.

Furthermore, the government's fiscal consolidation and arrear repayment measures under its three-year extended arrangement with the International Monetary Fund continues to help to restore fiscal strength following the sharp deterioration in the run-up to the June 2013 elections.