Albania’s current account gap narrows as tourism boom compensates slight FDI decline

Albania’s current account gap narrows as tourism boom compensates slight FDI decline

TIRANA, Dec. 11 – Albania’s current account gap narrowed to €519 million in the first three quarters of this year, down 18 percent compared to the same period last year despite a slight contraction in foreign direct investment, according to

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Albania asks Poland to set direct Tirana flights, invest in tourism

Albania asks Poland to set direct Tirana flights, invest in tourism

TIRANA, Dec. 7 – Albania has asked Poland to consider establishing direct flights with Tirana and encourage Polish investment in Albania, especially in the emerging tourism sector at a time when Poles are emerging as one of the country’s top

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Albania resumes electricity exports

Albania resumes electricity exports

TIRANA, Dec. 7 – The improving hydro situation in the country’s northern Drin Cascade following heavy rainfall causing massive floods in some parts of the country has had an immediate positive impact on the country’s state-run power utility, KESH, which

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Natural disaster compulsory insurance initiative raises concerns over new hidden tax

Natural disaster compulsory insurance initiative raises concerns over new hidden tax

TIRANA, Dec. 7 – A legal initiative to make insurance against floods and earthquakes compulsory and statements by Prime Minister Edi Rama that the government will no longer provide compensation against natural disasters following massive floods Albania experienced in the

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BoA: No indication of macroeconomic imbalances resulting from drug proceeds

BoA: No indication of macroeconomic imbalances resulting from drug proceeds

TIRANA, Dec. 6 – Albania’s central bank says it has no evidence over the alleged impact drug proceeds could have had on the country’s economy and the national currency strengthening against Europe’s single currency following a sharp increase in cannabis

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Public finances suffer blow as tourist season ends, new tax evasion campaign launched

Public finances suffer blow as tourist season ends, new tax evasion campaign launched

TIRANA, Dec. 6 – The end of the summer dominated tourist season and the launch of a renewed nationwide campaign against informality had a negative impact on government revenue last October. A monthly finance ministry report shows government revenue slightly

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Gov’t failed to collect staggering €820 mln, Supreme State Audit unveils

Gov’t failed to collect staggering €820 mln, Supreme State Audit unveils

TIRANA, Dec. 5 – Damage to the state budget in 2016 almost doubled to about 110 billion lek (€820), which is about a quarter of what the Albanian government collected in annual income, a Supreme State Audit report has shown.

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Bankwatch: Albanian farmers received peanuts in TAP compensation compared to Greek peers

Bankwatch: Albanian farmers received peanuts in TAP compensation compared to Greek peers

TIRANA, Dec. 5 – Albanian farmers received peanuts after losing land and livelihoods to the major Trans Adriatic Pipeline and sharply lower compensation than their peers in neighboring Greece, a report has shown unveiling the other side of the coin

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Albania floods: No major impact on GDP expected as key hydropower sector moves out of crisis

Albania floods: No major impact on GDP expected as key hydropower sector moves out of crisis

TIRANA, Dec. 4 – The massive floods that affected central and southern Albania over last weekend are expected to have no major impact on the country’s GDP growth despite significant damage to thousands of homes, the agriculture sector and public

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State budget to lose €2 mln as energy drinks stripped of excise duty

State budget to lose €2 mln as energy drinks stripped of excise duty

TIRANA, Nov. 30 – Ruling Socialist Party MPs have voted to lift the excise duty on energy drinks in a move that strips the state budget of about €2 million in annual income in apparent successful lobbying by importing companies.

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                    [post_content] => TIRANA, Dec. 11 - Albania's current account gap narrowed to €519 million in the first three quarters of this year, down 18 percent compared to the same period last year despite a slight contraction in foreign direct investment, according to data published by the country’s central bank.

A double-digit boost in exports and tourism revenue and a modest recovery in migrant remittances had a positive impact on Albania’s current account, a key indicator of a country’s economic health, measuring the flow of goods, services and investment into and out of the country.

The quarterly Bank of Albania balance of payments shows foreign direct investment, one of the country’s key drivers of growth in the past couple of years, slowed down this year as no new major projects are emerging to replace the key Trans Adriatic Pipeline and Devoll hydropower plant, already in their peak investment stage before completing by the end 2018.

FDI slightly dropped to €677 million in the first three quarters of this year, down by 4.25 percent or €30 million compared to the same period last year, in an expected slowdown for an election year that was preceded by a tense political situation ahead of the June 25 elections and uncertainties over the new government and its tax policy.

The Trans Adriatic Pipeline bringing Caspian gas to Europe and the Devoll Hydropower project by Norway’s Statkraft have been the key drivers of FDI in the country in the past three years at a time when oil and mining investment almost paralyzed following a slump in commodity prices in mid-2014, with a negative impact also on the country’s poorly diversified exports.

With no major FDI projects in sight, the Socialist Party government intends to fill the gap expected to be created starting 2019 with a package of incentives stripping luxury tourism investments of taxes for a 10-year period as well as a rather controversial €1 billion public-private partnership project to upgrade the country’s road, health and education infrastructure. The ambitious PPP project has already triggered concern over the benefits the country will have considering the troubled experience Albania has had with concessions, already costing taxpayers dozens of millions of euros in commitments the Albanian government has for specific services offered in key health sector as well as the customs scanning and waste management services.

Another key indicator in the central bank’s balance of payments shows foreign companies operating in Albania increased the transfer of profits to their parent companies rather than reinvesting them in Albania.

Central bank data shows the transfer of profits climbed to €221 million in the first three quarters of this year, up from €150 million during the same period last year, registering a 47 percent hike.

The peak tourist season also proved positive for one of Albania's most promising sectors bringing a record €1.3 billion in income for the first three quarters of this year when some 4.2 million tourists visited the country, according to central bank and INSTAT data.

Travel income rose by an annual 12.8 percent (€149 mln) in the first nine months of this year as the country's patriotic dominated tourism lost some ground and more Central European tourists discovered the country, triggering a sharp hike in prices.

However, Albanians increased their spending in trips abroad to €974 million in the first three quarters of this year, up 12 percent compared to the same period last, limiting the contribution the travel and tourism industry had on the balance of payments to only €337 million.

Migrant remittances also slightly recovered to €464 million in the first three quarters of this year, up only €14 million compared to the same period last year, as the situation in neighboring Italy and Greece, the country's main trading partners and hosts of about 1 million Albanian migrants slightly improved.

Still a key source of income for thousands of poor households, remittances slightly recovered for the third year in a row in 2016 when they climbed to €616 million, but remained about a third below their peak level of €952 million in 2007 just before the onset of the global financial crisis.

Albania’s exports also rose by 13 percent in the first three quarters of this year, fuelled by the resumption of steel exports, a moderate growth in the top garment and footwear exports and rising commodity prices increasing oil and mineral exports.
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                    [post_content] => TIRANA, Dec. 7 - Albania has asked Poland to consider establishing direct flights with Tirana and encourage Polish investment in Albania, especially in the emerging tourism sector at a time when Poles are emerging as one of the country’s top tourists.

Speaking in Warsaw this week at a joint news conference with his Polish counterpart Beata Szydlo, Prime Minister Edi Rama said there is great untapped potential in Albania-Poland economic and trade relations, also examined at a joint business forum.

“I have asked the Prime Minister to encourage Polish carriers to consider the opportunity of establishing a direct flight which would of course bring high and mutual benefits," said Rama.

His visit to Poland came one year after Polish Prime Minister Szydlo visited Tirana to reconfirm Poland’s support to Albania’s EU bid and urge stronger economic cooperation.

With Albania having made it to the top 10 favorite destinations for the Poles, Albanian officials have been lobbying Poland’s state-run airline LOT to launch direct flights with Tirana, instead of more expensive charter flights.

With an annual increase of about 74 percent in the number of tourists, the Poles are the surprise visitors on Albania’s top ten chart of tourists by citizenship during this year, according to Albania's state-run statistical institute, INSTAT.

More than 113,000 Polish tourists visited Albania in the first ten months of this year, reconfirming Polish interest in Albania after an annual survey conducted by the Polish Tour Operators Association, PZOT, ranked Albania’s as the Poles’ ninth favorite destination for 2015-2016.

"Albania is becoming more and more popular as a tourist destination for Poles. Polish tourists consider Albania as a very interesting destination and the tourism sector offers a huge cooperation space of mutual benefit for the two countries," the Polish Prime Minister said.

With tourism emerging as one of the key drivers of growth, Albania has recently offered tax incentives for investment in luxury hotels and resorts.

Few months ago, Tirana tested a Solaris Urbino 12 electric, a Polish production named ‘the bus of the year 2017,’ to launch the first public transport electric buses.

Albanian mandarins, massively produced in Saranda cooperative citrus farms, have also successfully penetrated the Polish market this year.

Polish foreign direct investment in Albania is estimated at only €2 million while the volume of trade exchanges between the two countries, overwhelmingly dominated by Albanian imports from Poland at about €63 million annually, according to central bank and INSTAT data.

A NATO ally and supporter of Albania's EU integration bid, Poland has been one of the bloc’s most dynamic economies and success stories since joining the EU in 2004.

Albania and Poland have been marking this year the 80th anniversary of the establishment of diplomatic relations. Ties between the two countries date much earlier from the 15th century Skanderbeg era to Polish contribution to Albanian discovery of oil and minerals in the first half of the 20th century.

 
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                    [post_content] => TIRANA, Dec. 7 - The improving hydro situation in the country's northern Drin Cascade following heavy rainfall causing massive floods in some parts of the country has had an immediate positive impact on the country's state-run power utility, KESH, which has resumed electricity exports following a six-month period of compulsory costly imports triggered by one of the worst droughts in decades.

In three emergency tenders as water flows in the Drin cascade registered a sharp increase, KESH exported electricity worth about €2.2 million and stored part of it in Kosovo under an exchange deal it has with KEK, Kosovo's power utility relying on coal-fired production.

KESH, which produces about three-quarters of domestic hydro-dependent electricity is also planning to sell electricity in several other tenders as water levels in the three hydropower plants have significantly improved and at a time when the country has already secured the overwhelming majority of electricity needs for December through costly imports of about €33 million, taking the total bill Albania has footed on electricity imports to about €200 million in the past six months.

Water levels at the Fierza HPP, the country’s largest, increased by about 6 meters to 276 meters following heavy rains, but yet remain significantly below optimal levels that can secure electricity generation for the country’s domestic needs and conduct export operations.

Albania’s domestic electricity generation is currently wholly hydro-dependent triggering the government to offer incentives for liquid gas-fired thermal power plants as the major Trans Adriatic Pipeline bringing Caspian gas nears completion.

The government has also urged investors to consider untapped potentials in solar and wind energy following a boom in the construction of small and medium-sized hydropower plants built under concession contracts in the past decade, currently producing about a quarter of domestic electricity, but being at risk of adverse weather conditions such as this year’s prolonged drought.

Meanwhile, a dispute between Serbia and its former breakaway province Kosovo over a long-standing electricity transmission issue continues to hold back a newly built German-funded Albania-Kosovo interconnection line.

The deadlock, which Germany is trying to mediate, has also halted Albania-Kosovo plans to set up a joint energy market and a power exchange helping Kosovo’s lignite-fired power plants and Albania’s hydro-dependent electricity system exchange electricity during their peak production levels, reducing dependency on costly imports.
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                    [post_content] => TIRANA, Dec. 7 - A legal initiative to make insurance against floods and earthquakes compulsory and statements by Prime Minister Edi Rama that the government will no longer provide compensation against natural disasters following massive floods Albania experienced in the past week has been met with skepticism by some economy experts who say Albanian households and businesses will face an extra tax at a time when voluntary insurance is already in place.

Floods in central and southern Albania last week following 100 mm of rainfall leading to rivers overflowing their banks flooded thousands of homes and dozens of businesses as well as agricultural crops and livestock, destroying the livelihoods of thousands of households.

The World Bank supported legal initiative has already been drafted by the country’s Financial Supervisory Authority, making insurance against floods and earthquakes compulsory at rates believed to range between €20 to €50.

Insurance companies, currently relying on compulsory vehicle insurance for about two-thirds of their income have welcomed the initiative, which would boost their annual income, but households who starting next year will pay more in property tax under a new value based formula at a 0.05 percent rate, could face a new unaffordable tax.

Economist Zef Preçi says making insurance compulsory, especially against floods is not a solution.

"It is time to understand that the legal framework in place on the insurance of buildings and businesses offers every possible thing for this purpose and whatever extra tax is counter-productive and is not related to solving the issue, respecting climate conditions and legal, territorial or construction standards required for a normal society and rule of law,” says Preçi, the head of the Albanian Center for Economic Research.

“The solution is through education, prevention, the compulsory displacement, the strict maintenance of every source of danger and the tight territory inspection to prevent at any cost home or business constructions that put at risk human lives and private and public property,” he adds.

According to him, annual flooding of buildings across river beds, most of which built illegally, is an almost bound event and there is no insurance company globally that can provide insurance against a phenomenon that has a 100 percent probability to happen.

Meanwhile, insurance companies whose annual turnover is at about €112 million at a modest per capita insurance of about €35 million, see the introduction of compulsory natural disaster insurance as a golden opportunity to boost their income considering about 1 million home and businesses that could almost double their annual income.

Avni Ponari, who heads one of the country's largest insurance companies, says Albania, which he considers a mine zone for natural catastrophes, is not doing anything special, but following global practices on compulsory insurance of buildings.

"Albania is a mine zone for natural disasters and in order to minimize the chances of this mine exploding, the government should intervene to prevent and provide a solution to challenges that time and the country imposes us," says Ponari in an op-ed published on local media.

"Many consider insurance as taxes and not a necessary service, but the more insurance you have, the more independent you are from the government, the municipality, the health sector etc. We pay only €30 per capita at a time when the average around the world is at €3,000 per capita,” he says.

According to him, the compulsory insurance against natural disasters will sharply cut current high rates triggered by the low number of insured households and businesses.

Dozens of businesses along the country’s key Tirana-Durres highway, including a big commercial center, faced flooding for the second time in one year, incurring millions of euros in losses due to being uninsured.

The Tirana Chamber of Commerce has also welcomed the legal initiative considering the poor voluntary insurance culture among Albanian businesses.

The World Bank says Albanian's population and economy are exposed to both earthquakes and floods, with earthquakes posing a greater risk of a high impact, lower probability event.

The region at greater risk floods is northern Shkodra where the country's main Drin River cascade and hydropower plants are situated while Fier and Tirana are most endangered by earthquakes.

The World Bank estimates the annual average population affected by flooding in Albania is about 50,000 and the annual average affected GDP about $200 million.

Meanwhile, the annual average population affected by earthquakes with 10 and 100-year return periods is about 200,000 and the annual average affected GDP about $700 million.
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                    [post_date] => 2017-12-06 15:21:29
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                    [post_content] => TIRANA, Dec. 6 - Albania's central bank says it has no evidence over the alleged impact drug proceeds could have had on the country’s economy and the national currency strengthening against Europe’s single currency following a sharp increase in cannabis cultivation and trafficking over the past couple of years.

Central bank governor Gent Sejko says the Bank of Albania monitors money outside banks only for the national currency, but has no information about Euro or dollar cash amounts in the country.

“The Bank of Albania measures the amount of money in circulation inside and outside banks, mainly related to the national currency, lek. We have no information regarding foreign currency, mainly euro but also dollar amounts circulating outside banks," governor Sejko has told a local TV as quoted in an interview published on the central bank’s website.

Money circulating outside banks in Albania is estimated at 255 billion lek (about €1.9 billion), and accounts for 20 percent of total money in circulation, in a phenomenon which the central bank says is characteristic of developing economies and poor financial education and infrastructure.

Euro-denominated deposits and loans, at a total of €4 billion, comprise about half of the total savings and credit in Albania’s banking system, making the Albanian economy highly euroised and limiting the impact of Albania’s easier monetary policy in boosting sluggish consumption and lending.

Commenting on the strengthening of Albania's national currency against Europe’s single currency, governor Sejko says the fluctuations have been within targets and there is no indication of macroeconomic imbalances resulting from drug proceeds.

"We don't think intervening to devalue the national currency is necessary. That is because fluctuations have been within the target and we haven't had macroeconomic imbalances from the impact of drug proceeds up to now. Social imbalances are as dangerous and must be monitored and kept in check," Sejko said, adding that the banking system is supervised by both the central bank and other law enforcement bodies dealing with money laundering.

After hitting an 8-year low of about 132 lek last June, the euro has slightly appreciated against the Albanian national currency and currently trades at 133.62 lek, but yet down 3.3 percent compared to the average rate a year ago and considerably below the average exchange rate of 140 lek for about five years until mid-2015.

The central bank says the country's expected economic growth of 4 percent this year has been a result of higher exports, foreign direct investment and tourism income which have also had an impact on the national currency's strengthening due to higher inflows of euros circulating in the local market.

Albanian economy experts have previously warned the massive nationwide cannabis cultivation even after the mid-2015 crackdown on the notorious internationally renowned marijuana-growing village of Lazarat, southern Albania, is having detrimental effects on the key agriculture sector, driving farmers away from cultivating traditional crops and making them take the risk of much more profitable illegal cannabis growing. Experts say the phenomenon shifts attention from the key agriculture sector, distorts the labor market and strengthens the criminal economy.

One kilo of cannabis sells at €200 to €300 locally, a huge amount equal to cultivating about 1 metric ton of traditional crops such as wheat or corn.

The opposition and some economy experts have also voiced concern over drug proceeds being laundered in the construction industry which has been the key driver of growth in the past couple of years.

In early 2017, the massive cannabis cultivation was also linked to huge bee losses with experts blaming the phenomenon on the use of pesticides in cannabis plantations.

Albanian police say they destroyed 2.5 million of cannabis plants in 2016 spread over a 213 hectare area nationwide, a 3-fold increase compared to the whole of 2015, making Albania Europe’s largest cannabis producer. Police claim cannabis cultivation has significantly dropped this year.

Albanian law enforcement authorities seized more than €8 million in suspected money laundering transfers and accounts in 2016, a considerable part of which originating from narcotics trafficking and cultivation, according to an annual report by the country’s Financial Intelligence Unit. Another €16 million was seized in real estate assets of suspected criminal origin, says the Agency for the Administration of Seized and Confiscated Assets.

As a rule, banks and other financial institutions have to report on transactions of more than 1 million lek (€7,000) while the Property Registration Office reports on contracts worth more than 6 million lek (€42,000).

 

TAP, Devoll HPP completion

Albania's central bank is optimistic the country's economy will continue recovering in the next few years and return to equilibrium with a growth rate of more than 4 percent and inflation rate at 3 percent by 2019.

The forecast comes despite two of the country's major energy-related investment, TAP and the Devoll HPP, completing their investment stage by 2018 and leaving a huge gap which the government intends to fill through an ambitious Euro 1 billion public-private partnership project and tax incentives to build luxury hotels and tourism resorts.

The World Bank and the IMF expect the Albanian economy to slow down to 3.5 to 3.7 percent in the next couple of years as the two major energy-related that served as a key driver of growth in the past few years complete their investment stage by 2018.

"We expect the Albanian economy to continue performing well despite the investment and construction stage of those two projects. We have to keep in mind that the conclusion of these two projects, will not stop income that is generated from them which continue even after the construction and investment stage is completed. These projects will generate income in energy and exports and the conclusion of these two projects will not put the Albanian economy to a halt," says Sejko.

"The Albanian economy will continue its growth mainly because of growth in consumption and foreign and domestic investment. The continuous call we have made to undertake structural reforms and the continuation of reforms undertaken to improve the general economic environment and the business climate makes expectations on the attraction of foreign direct in the country high,” he adds.

The Albanian government has set an annual spending threshold of about 5 percent of annual tax income on PPP projects, but governor Sejko has suggested the ceiling should be legally included in the organic budget law as a percentage to GDP and urged caution on their impact to the country's public debt.

While the 2018 public private partnership costs pose no threat to public finances, an ambitious €1 billion PPP project the ruling Socialists have announced for the next four years has worried the International Monetary Fund, the opposition and some economy experts who say the planned road, education and health PPP investment could create new arrears and hamper efforts to bring public debt to 60 percent of the GDP by 2021.

Taxpayer support about a dozen public private partnerships the Albanian government has signed with private companies in the key health, waste-to-energy and customs sectors is expected to increase by a third to 9.4 billion lek (€69.2 mln) in 2018, but account for only about 2.4 percent of total annual tax revenue, half of the threshold the government has set.

The Arbri Road linking Albania to Macedonia, some 150 schools, hospitals and healthcare facilities are on the PPP agenda.
                    [post_title] => BoA: No indication of macroeconomic imbalances resulting from drug proceeds 
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                    [post_date] => 2017-12-06 11:04:21
                    [post_date_gmt] => 2017-12-06 10:04:21
                    [post_content] => TIRANA, Dec. 6 - The end of the summer dominated tourist season and the launch of a renewed nationwide campaign against informality had a negative impact on government revenue last October.

A monthly finance ministry report shows government revenue slightly dropped to 36.3 billion lek (€ 270 mln) last October, down 0.2 percent year-on-year and missed their monthly target by 1.6 percent or 603 million lek (about €4.5 mln).

However, government revenue during the first ten months of this year remain on track to their target, having registered a 6.4 percent increase mainly thanks to a moderate hikes in the key value added tax and excise duties, accounting for about half of the country's total tax income.

The situation has been boosted by a positive impact some major energy-related investment have had on the country’s economy and the peak tourism season despite uncertainties in the run up to the June 25 general elections.

The performance for the first ten months of this year has also been positively affected by some legal changes disciplining government expenditure during election years in a bid to achieve a long-term debt target of 45 percent of the GDP, compared to a current 70 percent debt level, estimated to be too high for the current stage of Albania’s economic development.

However, the October performance exactly when the Albanian government launched a new nationwide campaign against informality and when the season tourism season was over, hints of problems with public finances at a time a prolonged drought has cost state-run operators relying on domestic hydropower production a staggering €200 million in costly electricity imports since mid-2017.

The tax administration says they imposed penalties on 4,400 businesses, one out of five inspected companies, and closed down 523 businesses not registered with the authorities or not issuing tax receipts during October-November as part of a renewed nationwide campaign on tax evasion, one of the top concerns for foreign and local investors.

The renewed nationwide campaign against tax evasion that the Albanian government has launched will focus on the country ‘big fish’ starting next January when the so-called ‘double standard balance sheets’ and underreported wages that private sector companies commonly employ to avoid paying taxes will be the tax inspectors’ new target.

Prime Minister Edi Rama says nearly half of the country’s 800 largest enterprises underreport wages and double balance sheets is a common phenomenon when it comes to borrowing from banks and reporting to the tax authorities.

Starting April 2018, the VAT threshold on businesses will be lowered to annual turnover of 2 million lek (about €15,000), down from a current 5 million lek (€37,000) while the property tax will be collected on a value-based formula applying a 0.05 percent rate on homes and 0.15 percent on business facilities starting next January, according to the 2018 fiscal package.

The operation is expected to trigger a hike in government revenue, but could have a negative impact on domestic consumption due to a further hike in the tax burden, already one of the region’s highest and being one of the top concerns in the country’s competitiveness compared to other regional economies.

The recent flooding affecting thousands of household in central and southern Albanian areas is also expected to have a negative impact on consumption and the key agriculture sector next year when the Albanian government expects the economy to grow by 4.2 percent, up 0.5 to 0.7 percent compared to what international financial institutions expect for the Albanian economy in 2018 when major energy-related projects such as the Trans Adriatic Pipeline complete their investment stage.

In a bid to bring down public debt to 60 percent of the GDP by 2020, the Albanian government has applied a tight spending policy during this year with public investment at about 6.3 billion lek (€46.6 mln) lower compared to the target set for the first ten months of 2017.

The public investment was also negatively affected by the pre-election freeze in public procurement which lasted for about three months until last September when a new Socialist Party government led by Prime Minister Edi Rama took over.

 

Opposition concerned over drug proceeds impact on economy

The main opposition Democratic Party says high taxes and more than 300,000 Albanians having left the country in the past few years are leading to 40 businesses a day going bankrupt as a result of inability to survive in an unequal market and informal economy dominated by crime, drugs and corruption proceeds.

"During the past five years in every budget that this government adopted, there were tax hikes for both big and small businesses. Today we pay 1.5 billion euros more in taxes compared to five years ago. Every day some 40 businesses close down because of inability to survive in an unequal market," said Democratic Party MP Jorida Tabaku this week.

"Today the largest informal economy is that of drugs and it is useless that [finance minister] Ahmetaj sits down with businesses to discuss how informality can be reduced. Today, 1.2 billion euros are injected only as a result of drugs. Economic growth in Albania is currently called into question as the whole of it comes from the construction sector at a time when the Bank of Albania says it remains unknown what the sources of financing it are," she added.

Cannabis cultivation peaked in 2016 when it registered a 3-fold hike, but the government says the phenomenon has been sporadic this year.
                    [post_title] => Public finances suffer blow as tourist season ends, new tax evasion campaign launched 
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                    [post_date] => 2017-12-05 18:01:14
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                    [post_content] => TIRANA, Dec. 5 - Damage to the state budget in 2016 almost doubled to about 110 billion lek (€820), which is about a quarter of what the Albanian government collected in annual income, a Supreme State Audit report has shown.

In a report monitoring the implementation of the 2016 budget, the public finances watchdog says a considerable amount of the damage incurred to the state budget was a result of abuses with the much-rumored concessions and a sharp hike in accumulated debt private companies owe to the tax administration.

The report, which is being examined by Parliament, shows damage to the state budget as a result of concessions of public property and their misadministration was at about 13 billion lek (€98 million) in 2016.

The overwhelming majority of abuses were identified in state-run Albpetrol oil company with about 9 billion lek (€66.6 mln) in missing income as a result of implementation of concession contracts with oil companies in violation of legal provisions.

The Supreme State Audit says oil companies operating in the country are actively engaged in practices of reporting high expenditure in order to avoid paying the corporate income tax which in case of oil companies is paid at a 50 percent only after investment costs are met.

With oil prices at an almost historic low of about $30 a barrel in 2016, Bankers Petroleum drilled no new wells in 2016, but the operation was not accompanied by a decrease in expenditure, auditors say.

Bankers Petroleum, which in late 2016 was acquired by a Chinese company after more than a decade of operations as a Canadian-run company, is the country’s largest oil producer accounting for 95 percent of domestic production at Patos-Marinza, one of Europe’s largest onshore oil fields.

In a key arbitration case, the Albanian government is seeking to settle a $57 million tax dispute with the now China-owned Bankers Petroleum, the country’s largest oil producer, dating back to 2011 when the company was run by the Canadians.

The Supreme State Audit also unveils the debt that private companies owe to the tax administration rose to about 51 billion lek (€383 million) in 2016, more than double compared to a year ago as the number of debtor companies increased by about 64,700 to 121,500, almost three-quarters of the total active enterprises. The overwhelming majority of debt is owed by big oil and state-run electricity operators but also gambling companies.

By contrast, the Albanian government owed private companies about 2.3 billion lek (€17 million) at the end of 2016 in new arrears.
                    [post_title] => Gov’t failed to collect staggering €820 mln, Supreme State Audit unveils
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                    [post_content] => [caption id="attachment_134853" align="alignright" width="300"]he pipeline route cuts like a scar through what used to be Arjan’s olive grove, one of the farmers affected by the TAP pipeline. Photo: Bankwatch The pipeline route cuts like a scar through what used to be Arjan’s olive grove, one of the farmers affected by the TAP pipeline. Photo: Bankwatch[/caption]

TIRANA, Dec. 5 - Albanian farmers received peanuts after losing land and livelihoods to the major Trans Adriatic Pipeline and sharply lower compensation than their peers in neighboring Greece, a report has shown unveiling the other side of the coin for the country’s major energy project and key driver of growth in the past couple of years.

A new fact-finding mission by Bankwatch, a Czech Republic-based environmental and human rights group in central and eastern Europe, has shown that farmers affected by TAP's Albania route were dissatisfied with the level of compensation they received and the way they were treated by the company and its Albania representatives, but had no other option.

Arjan, an olive farmer in Berat, southwestern Albania, used to own 130 olive trees that were 70-80 years old. In his irrigated and well-maintained orchard, one tree gives up to 150 kg of olives per year. At a price of 150 lek (€1.12) per kg, he earned about 22,500 lek (€169) per tree every year. The compensation he received was only 25,000 lek (€187.5) per tree, hardly more than one year of his income per tree. But it will take 15-20 years until newly planted trees will give olives. And even then, they will only provide about 10-15 percent of the yield he used to have.

In effect, Arjan received the worth of one year’s olive production while losing more than 15 times that, Bankwatch experts say.

Arjan’s business not only supported a family of about 16 people, but also several seasonal workers he employed. Now he is left with next to nothing for years to come. “I don’t know what we will be doing,” he is quoted as saying by the report. “We had a good income from those trees,” he adds.

The report shows two different unjustified formulas were developed for Albania and Greece to calculate compensation for crops and land with the TAP consortium providing no reasonable grounds for its decision to treat farmers differently depending on the country.

"Although the market conditions and prices differ in Greece and Albania, the nature of impacts are identical – the pipeline crosses agriculture parcels with annual and perennial crops, causes damages to infrastructure and reduces the value of private properties. The general principles for compensation proposed by TAP are therefore the same in both countries," says the report.

In late 2016, Albania finalized contract renegotiations with the Trans Adriatic Pipeline consortium with a new deal that will increase the country’s financial benefits by another €80 million following complaints of smaller financial benefits compared to neighbouring Greece, from where TAP crosses Albania before it reaches southern Italy through its offshore section across the Adriatic.

None of the dozens of compensation offers and agreements as well as notarial documents provided by TAP that relate to the compensation include a detailed valuation of land lease, crops and assets. Meanwhile in several cases, where a person’s land was affected, they received new certificates where the boundaries and even the size of their land had changed, says the EU-funded Bankwatch report.

Considered a project of common interest by the EU and its Energy Union, the TAP project bringing Caspian gas to Europe also curbs Europe's reliance on Russian gas.

As the project is being considered for a staggering loan of up to €2.5 billion by the European Investment Bank, the European Union's Bank, and London-based EBRD, Bankwatch warns European financial institutions must not support a project that violates human rights and fundamental right to property as in Albania's case unless the compensation methodology is revised to provide fair replacement based on market prices and that the project does not lead to the loss of livelihood for all affected people.

The Trans Adriatic Pipeline consortium has rehabilitated several local roads, bridges and schools and paid attention to archeological finds during its Albania-section works in the past three years as part of its corporate social responsibility.

At the end of 2016, TAP says it completed the first phase of road infrastructure rehabilitation in Albania, comprising the upgrade of approximately 58 km of access roads, the construction of two new bridges and refurbishment of 40 bridges. Works are underway for the second phase of building access roads and by end-November 2017, more than 78 percent of works had been completed.

With investment of more than Euro 1 billion, about 10 percent of Albania's GDP, TAP has been a key driver of Albania's growth in the past couple of years and is expected to considerably negatively affect Albania's FDI inflows after its completes its investment stage by late 2018.

Experts have described TAP as an opportunity that would benefit Albania both economically and politically, making the country an important hub of the international gas pipeline for the Western Balkans.

The pipeline in Albania will be approximately 211 km long, starting at the Korça region, southeastern Albania on the border with Greece.

About 13,000 pipes of mostly 18 metres are being used for the Albanian section of TAP, which also includes a 37 km offshore section in the Albanian part of the Adriatic linking it to southern Italy.

With construction works already in their peak stage, TAP’s first gas deliveries to Europe are targeted by early 2020.
                    [post_title] => Bankwatch: Albanian farmers received peanuts in TAP compensation compared to Greek peers 
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                    [post_date] => 2017-12-04 12:32:44
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                    [post_content] => TIRANA, Dec. 4 – The massive floods that affected central and southern Albania over last weekend are expected to have no major impact on the country’s GDP growth despite significant damage to thousands of homes, the agriculture sector and public infrastructure. Experts estimate the negative effect on the GDP growth prospects is expected to be compensated by a sharp cut in electricity imports, having cost the country’s hydro-dependent power sector a staggering €200 million, about 0.2 percent of the GDP, in costly imports since mid-2017.

Albania's Civil Emergencies Committee says more than 3,300 homes, 40 businesses and 10,000 hectares of agricultural land were flooded during last weekend's flash floods as the country's main rivers overflew their banks, causing severe material damage especially in the southern Albania regions of Fier and Vlora.

The country’s central areas were also affected with dozens of businesses along the key Tirana-Durres highway flooded for the second time in the course of one year at the place known as ‘Qafe-Kashar’ near the Airport overpass. Some of the businesses claimed damage of about €1 million from the flash floods, an amount which could take some of them to bankruptcy due to being uninsured against natural disasters.

Suburban areas in Tirana, Durres and Kruja also suffered huge damage, especially in home, livestock and agricultural crops.

The damage is apparently huger in the southern Fier and Vlora region where the overflow of Vjosa River, the country’s second largest river whose first 80 km flow through Greece, caused major damage to thousands of homes and agricultural crops as most livestock had been displaced due to warnings of heavy rains of about 100 mm.

Some 56 schools and 65 bridges were also damaged by the weekend floods.

With no emergency situation declared, the Albanian government has pledged partial compensation for the flood-affected households, but warned households and businesses at high-risk areas need to insure to protect themselves from natural disasters such as floods.

"The state budget cannot always handle everything. It is very important for all households and businesses to become aware and understand that they need to take measures and insure against natural disasters like in every normal country so that damage is compensated in real time based on this mechanism," Prime Minister Edi Rama said on Monday heading the Civil Emergencies Coordination and Management Committee.

The country’s financial supervisory authority has already finalized with the World Bank assistance a draft law targeting to turn current voluntary-basis insurance against natural disasters into compulsory on a risk-based system, but it’s the insurance rates and households’ reluctance to pay that are holding it back.

"The law has been passed by the Authority and is being discussed with the World Bank and market stakeholders. We have to consider that we have to be careful when legally making it compulsory for households as the service provided must match the rate every household has to pay," Ervin Koçi, the head of the Financial Supervisory Authority has earlier said.

The Albanian economy is on track to register a 4 percent GDP growth rate in 2017 fuelled by some major energy-related investment such as the Trans Adriatic Pipeline and a big hydropower plant by Norway’s Statkraft as well as recovering tourism sector.

The Albanian government expects the 2018 growth to recover to 4.2 percent, but some international financial institutions forecast growth will slow down to about 3.5 percent as major energy-related investment completes.

However, the floods are expected to have a negative effect on the key agriculture sector, employing about half of the country’s population but producing only a fifth of the Albania’s GDP.

The situation is also expected to be critical for thousands of flood-affected households and dozens of businesses who lost nearly everything unless they receive compensation.

On the positive side, heavy rainfall has considerably improved the hydro situation in the country’s northern Drin Cascade, where water levels had reached almost a historic low following one of the worst droughts in decades, triggering compulsory costly electricity imports of about €200 million since last June and posing a key threat to public finances and GDP growth prospects for 2018.

The rising water flows in the reservoirs of the state-run HPPs are expected to sharply cut electricity imports and bring the country’s wholly hydro-dependent domestic electricity system back to normality, escaping an apparent financial crisis that was paralyzing much-needed investment in the country’s poor condition power grid.

Floods have been the most imminent threat to Albania’s economy in the past two and a half decades, also claiming dozens of lives, and have become an almost annual phenomenon in the past five years, also affecting central Albanian areas.

“The annual average population affected by flooding in Albania is about 50,000 and the annual average affected GDP about $200 million,” says the World Bank in a report.

Due to climate change risks, population growth, urbanization and the increase in exposed assets both floods and earthquakes are expected to cause much more damage in their 100-year return periods, World Bank experts warn.
                    [post_title] => Albania floods: No major impact on GDP expected as key hydropower sector moves out of crisis 
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                    [post_date] => 2017-11-30 10:26:00
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                    [post_content] => TIRANA, Nov. 30 – Ruling Socialist Party MPs have voted to lift the excise duty on energy drinks in a move that strips the state budget of about €2 million in annual income in apparent successful lobbying by importing companies.

SP lawmakers at the parliamentary economy committee this week argued the excise duty, currently at 30 lek (€0.22)/liter, did not have an impact on curbing consumption.

"The excise duty introduction has not had an impact on their consumption," said Socialist Party MP Ervin Bushati, the initiator of a last-minute amendment, adding that the government could revise the law again to ban the sale of energy drinks for people aged under 18, those suffering from diabetes and heart problems, warnings already in place on energy drink packaging.

Opposition Democratic Party MPs accused the Socialist Party MPs of hypocrisy with the excise rate changes following their 2014 introduction when the Socialists argued them with disciplining the market and helping local energy drink producers.

The excise duty on energy drinks was initially levied at 50 lek (€0.37)/liter, before it was cut to 30 lek/liter in 2015.

The changes to the excise duty law are part of the 2018 fiscal package which is under examination at parliamentary committees before getting the final okay by Parliament in December. They are expected to become effective starting next January.

Currently, the overwhelming majority of energy drinks are imported from Austria and the Netherlands while domestic production has almost been stopped.

Data from the customs administration shows Albania imported 7,154 metric tons of energy drinks in the first ten months of this year, up 18 percent compared to the same period last year, collecting about 215 million lek (€1.6 million) in excise duties.

Meanwhile, domestic production of energy drinks dropped to a mere 1,000 litres, down from about 75 metric tons during the first ten months of 2016.
                    [post_title] => State budget to lose €2 mln as energy drinks stripped of excise duty
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            [post_date] => 2017-12-11 17:49:16
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            [post_content] => TIRANA, Dec. 11 - Albania's current account gap narrowed to €519 million in the first three quarters of this year, down 18 percent compared to the same period last year despite a slight contraction in foreign direct investment, according to data published by the country’s central bank.

A double-digit boost in exports and tourism revenue and a modest recovery in migrant remittances had a positive impact on Albania’s current account, a key indicator of a country’s economic health, measuring the flow of goods, services and investment into and out of the country.

The quarterly Bank of Albania balance of payments shows foreign direct investment, one of the country’s key drivers of growth in the past couple of years, slowed down this year as no new major projects are emerging to replace the key Trans Adriatic Pipeline and Devoll hydropower plant, already in their peak investment stage before completing by the end 2018.

FDI slightly dropped to €677 million in the first three quarters of this year, down by 4.25 percent or €30 million compared to the same period last year, in an expected slowdown for an election year that was preceded by a tense political situation ahead of the June 25 elections and uncertainties over the new government and its tax policy.

The Trans Adriatic Pipeline bringing Caspian gas to Europe and the Devoll Hydropower project by Norway’s Statkraft have been the key drivers of FDI in the country in the past three years at a time when oil and mining investment almost paralyzed following a slump in commodity prices in mid-2014, with a negative impact also on the country’s poorly diversified exports.

With no major FDI projects in sight, the Socialist Party government intends to fill the gap expected to be created starting 2019 with a package of incentives stripping luxury tourism investments of taxes for a 10-year period as well as a rather controversial €1 billion public-private partnership project to upgrade the country’s road, health and education infrastructure. The ambitious PPP project has already triggered concern over the benefits the country will have considering the troubled experience Albania has had with concessions, already costing taxpayers dozens of millions of euros in commitments the Albanian government has for specific services offered in key health sector as well as the customs scanning and waste management services.

Another key indicator in the central bank’s balance of payments shows foreign companies operating in Albania increased the transfer of profits to their parent companies rather than reinvesting them in Albania.

Central bank data shows the transfer of profits climbed to €221 million in the first three quarters of this year, up from €150 million during the same period last year, registering a 47 percent hike.

The peak tourist season also proved positive for one of Albania's most promising sectors bringing a record €1.3 billion in income for the first three quarters of this year when some 4.2 million tourists visited the country, according to central bank and INSTAT data.

Travel income rose by an annual 12.8 percent (€149 mln) in the first nine months of this year as the country's patriotic dominated tourism lost some ground and more Central European tourists discovered the country, triggering a sharp hike in prices.

However, Albanians increased their spending in trips abroad to €974 million in the first three quarters of this year, up 12 percent compared to the same period last, limiting the contribution the travel and tourism industry had on the balance of payments to only €337 million.

Migrant remittances also slightly recovered to €464 million in the first three quarters of this year, up only €14 million compared to the same period last year, as the situation in neighboring Italy and Greece, the country's main trading partners and hosts of about 1 million Albanian migrants slightly improved.

Still a key source of income for thousands of poor households, remittances slightly recovered for the third year in a row in 2016 when they climbed to €616 million, but remained about a third below their peak level of €952 million in 2007 just before the onset of the global financial crisis.

Albania’s exports also rose by 13 percent in the first three quarters of this year, fuelled by the resumption of steel exports, a moderate growth in the top garment and footwear exports and rising commodity prices increasing oil and mineral exports.
            [post_title] => Albania’s current account gap narrows as tourism boom compensates slight FDI decline
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        (
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)

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