By Benet Koleka

TIRANA (Reuters) - Albania will upgrade its road network with one billion euros from private capital over the next four years, and it plans to open an energy exchange in early 2019, an official said.

Economic projections show businesses can build the roads first and be repaid over 12 years, Damian Gjiknuri, the infrastructure and energy minister, told Reuters on Tuesday.

One of Europe's poorest countries, Albania has built highways to its major towns and ports, but clogged two-lane roads make up the rest of its system.

Gjiknuri said the country wants to build high-speed roads of European standards linking areas with tourism or industrial potential, bringing closer its towns and its Balkan neighbors.

"The financing will come from the budget revenue under a normal scenario of economic growth. We do not see big risks affecting the normal growth of Albania," Gjiknuri said.

"These investment will be spread over time, up to 12 years for the payments to be made, but the infrastructure will be ready in three years, four at the most," he added.

Albania's gross domestic product is forecast to grow around four percent in 2017. Its 2018 budget projects four percent growth in 2018 and a decline in public debt by 2.5 percentage points to 68.6 percent of GDP. Similar or higher growth rates are expected in the medium term.

The International Monetary Fund has cautioned the government over the way it will account for the debt, spreading it over years rather than treating it as a lump sum at the time a contract is issued.

"The other alternative would be to wait until we have all the money, but that means stagnation," Gjiknuri said.

Under the plan, businesses would build roads - those with a feasibility study would get a bonus - and pay the cost. The state would repay them in 10 to 12 years.

Sitting between Montenegro and Greece, Albania hopes to build a Blue Highway, linking it to Croatia via Montenegro. A European Union grant is being used for a feasibility study.

A net importer of energy, Albania has written a draft law to create an energy market. Parliament is expected to approve the bill this year or early in 2018.

Gjiknuri said Nord Pool Consulting is now advising Albania establishing the market. Neighboring Kosovo and possibly a foreign company may join it.

"Our goal is to create a liquid private market in order to stimulate not just the trading but also the production of electrical power," Gjiknuri said.

"To be an optimist, I think it will start working early in 2019. That is our strategic objective," Gjiknuri said.

(Reporting By Benet Koleka, editing by Larry King)