January
Exports grow by 20% in 2011
Bank of Albania data available in Euro show exports continued to positively perform despite the crisis-hit EU member countries, which are the destination of 70 percent of Albania’s exports. Fuelled by ongoing rising demand from Italy, Albanian exports continued registering double-digit growth for the second year in a row after the shrink in the outbreak of the global crisis in 2009. Central bank data show Albania’s exports rose by 19.7 percent to Euro 1.4 billion in 2011, compared to an annual growth rate of 56 percent in 2010 and an 18 percent shrink in 2009. Despite suffering severe debt crisis and its economy slowing down, Italy continued remaining Albania’s top trade partner accounting for 53 percent of exports and 30 percent of imports. Detailed INSTAT data show the fa谮 industry, producing garment and footwear products with imported raw material, continued remaining the top export performer also thanks to Arab spring turmoil and the removal of customs fees.
Liberalization cuts insurance market growth
The liberalization of compulsory insurance market considerably affected revenues for companies operating in Albania with competition bringing lower fees. Data published by the Financial Supervisory Authority show new insurance premiums in 2011 reached 8.3 billion lek, up only 1.8 percent compared to 2010 despite the number of insurance policies registering a sharp 77 percent increase to 1.3 million. Back in 2010, the insurance market grew by 4.17 percent despite the number of policies dropping by 2.5 percent.
Starting from Feb. 1 2012, rates for compulsory motor vehicle insurance more than doubled in a sudden unexpected move following a sharp drop after the market was liberalized in mid-2011.
February
Banks’ profits at worst levels
Banks’ profits in 2011 registered their lowest rate during the past 12 years as bad loans reached a historical high record of around 19 percent, according to statistical reports published by the Bank of Albania this week. Data show banks’ net profits at the end of 2011 were only 706 million lek (Euro 4.95 million), the worst level since the 1997-1998 pyramid investment schemes when banks registered negative balance sheets. The 2011 profits are almost 10 times lower compared to 2010 and 15 times lower compared to the peak 2007 profits of 10 billion lek (Euro 70 million). The sharp rise in bad loans at an official 18.94 percent of the total at the end of 2011, three times higher compared to the end of 2008, and delays in executing collateral are the key reasons for the poor performance in the banking system.
Race for Albania’s first toll road
Five international companies, three of which joint-ventures, submitted bids to upgrade, operate and maintain the new Durres-Kukes highway linking Albania to Kosovo in what would become Albania’s first toll road. Partly operational since June 2009, the Durres-Kukes highway and its 5.5 km twin-bore Thirre tunnel is estimated to cost government around 4 million euros annually.
The concession covers a 118 km segment from Milot to Morine, the major part of the Durres-Kukes nicknamed the ‘Highway of Nation’ including the 5.5 km Rreshen- Kalimash tunnel.
March
Albanians increase savings, cut down on lending
While domestic consumption and investments remain sluggish preventing the country’s economic recovery, Albanians continue depositing considerable amounts in banks uncertain about their futures and fearing a possible escalation of the crisis. Meanwhile, lending continues growing moderately at slightly more than 10 percent compared to the pre-crisis levels of 30 to 50 percent. Central bank data show deposits grew by around 193 billion lek (Euro 1.35 bln) to 881.3 billion lek in 2011, registering an 11.7 percent increase, lower compared to the 18.5 percent growth rate in 2010, but better compared to 2008 and 2009 at 2.2 percent and 6 percent respectively. Meanwhile, new loans rose by 58.4 billion lek (Euro 410 million) to 531 billion lek, recording a 13 percent increase, the highest annual growth rate since 2008 when lending grew by 35 percent. In the global crisis year of 2009 credit growth slowed down to 11 percent and decelerated to 9.6 percent in 2010, according to Bank of Albania data.
Greek crisis, obvious impacts on Albania
Lower remittances and trade exchanges are the two most obvious consequences of the impacts the crisis in neighbouring Greece, the country’s second most important investor and trade partner, has had on Albania, domestic and international experts said in conference held this week in Tirana. An important source for thousands of revenue for dozens of thousands of households in Albania remittances from Greece which hold the majority share, have also affected domestic consumption in Albania, the construction sector which has been in crisis since 2008, and led to a sharp rise in bad loans. With more than 600,000 immigrants, the Albanian community in Greece is the biggest migrant community there and accounts for 10 percent of the neighbouring country’s total workforce. INSTAT data show Greece dropped to the fourth most important destination for Albanian exports but remained the second top destination for imports for 2011. Several manufacturing factories in southern Albania producing garment and footwear products and having Greece as their destination have significantly reduced production or even closed down their factories in the past couple of years.
April
FDI, tourism revenue, remittances shrink
Foreign direct investment, remittances and tourism revenue registered a decrease in 2011, reflecting Albania’s exposure to the escalation of the crisis in Greece and Italy, the country’s top trade partners and investors, also hosts to more than 1 million Albanian migrants. Data published by Albania’s central bank show FDI, which until 2010 registered consecutive growth rates making Albania the second largest recipient in South-East Europe, were the hardest hit in annual terms suffering a 6.5 percent shrink. Tourism revenue and migrant remittances also dropped by 4.7 percent and 0.3 percent year-on-year respectively, but were far worse compared to their peak levels in 2009 and 2007. On a falling trend since 2007, migrant remittances whose overwhelming majority comes from neighboring Greece and Italy, showed stability in 2011 when they dropped by only 0.3 percent compared to 2010 but were 28 percent down compared to their peak level back in 2007 just before the outbreak of the global crisis.
INSTAT: GDP grew by 3.1% in 2011
The Albanian economy grew by 3.1 percent in 2011, remaining at the same moderate growth rates for the third year in a row, according to a GDP report published by the country’s state Institute of Statistics, INSTAT, on Thursday. INSTAT data show the GDP grew by 3.8 percent in final quarter of 2011 year-on-year but was up only 0.1 percent compared to the previous third quarter. Transport, trade, services, post-telecommunication and construction registered annual growth rates of 15.4%, 8.8%, 5.4%, 3.8% and 1.2% in the final quarter of 2011, while industry shrank by 7.8 percent. Agriculture also grew by 1.9 percent y-o-y.
IMF: Growth to range from 0.5 to 2.5%
The International Monetary Fund says Albania will be one of the hardest-hit emerging economies in the Central and Eastern Europe region in the next seven years. In its new World Economic Outlook published this week, the IMF expects the Albanian economy to grow by only 0.5 percent in 2012, 1.7 percent in 2013 and at an annual 2.5 percent from 2014 to 2017, recording one of the lowest growth rates among 14 Emerging and developing economies in central and eastern Europe. What’s more concerning, Albania’s public debt currently at around 59 percent of the GDP, is expected to jump the legal deadline of 60 percent of the GDP by 1.7 percent in 2012 and gradually grow to 67 percent until 2017, remaining lower only compared to EU member Hungary, according to the IMF database.
May
95% of Albanians with less than Euro 17,000 in bank accounts
The overwhelming majority of Albanian depositors have managed to save up to 2.5 million lek (Euro 17,667, USD 22,737) which is the threshold making them fully safe and guaranteed by the Deposit Insurance Agency. The remaining 5 percent of depositors having more than 2.5 million lek in their bank accounts possess around 58 percent of the total amount of deposits in the 16 commercial banks operating in Albania, according to data presented in the annual report of the Deposit Insurance Agency this week. The data reconfirm the deep social gap between the rich and the poor. Average deposits for the rich stand at 55,000 USD while the average savings for the overwhelming majority is at around USD 2,000.
Albania’s purchasing power 69% below EU 27 average
Albania’s Gross Domestic Product (GDP) per capita expressed in purchasing power standards (PPS) in 2011 slightly recovered to 31 percent of the EU 27 but ranked second from bottom in a 37 country list, according to a report released by Eurostat, the statistical Office of the European Union this week. Data show Albania’s GDP per capita in PPS ranks better only compared to also potential EU candidate Bosnia and Herzegovina’s 29 percent, remaining at less than one-third of the EU 27 average. Compared to the four EU candidate countries – Serbia, Macedonia, Montenegro, and Turkey – Albania’s PPS stands 4 to 21 percent below.
July
CEZ favoured to buy power from KESH 23% cheaper
Albania’s Energy Regulatory Entity (ERE) has lowered power prices for Czech-owned distribution operator CEZ Shperndarje by 23 percent after losing a legal battle with the company on the bad debt and continuous complaints about the unaffordable prices risking investments and CEZ’s presence in Albania. In a decision taken last July, ERE decided to lower power prices state-run corporation KESH charges on CEZ to 2.2 lek kWh, down from 2.84 lek kWh since Jan. 2012 when CEZ suffered a 90 percent increase in tariffs.
KESH will be stripped of USD 33 million a year from the decision, experts estimate.
Economy shrinks in Q1
The Albanian economy suffered a slight shrink in the first quarter of this year, which is the second during the past two years, revealing that the global crisis impacts will be far tougher than government expects. Latest data published by the country’s Institute of Statistics (INSTAT), often prejudiced for the unreliability of its data, show the GDP contracted by 0.2 percent in the first quarter of 2012 year-on-year as performance in the key industry and construction sectors registered sharp double-digit shrinks.
The last time the Albanian economy registered a shrink was in the final quarter of 2009 when INSTAT first reported a 0.8 percent drop but later adjusted it to 1.5 percent year-on-year.
Key interest rate lowered to 4% as previous cuts fail
Albania’s central bank announced it has cut the key interest rate by another 0.25 percent to 4 percent, the lowest ever historical rate, after previous consecutive cuts failed to either boost lending or lower T-bill yields. Speaking at a press conference, Bank of Albania governor Ardian Fullani said the decision would boost internal demand and consumption as a result which remains sluggish.
For the first half of this year, inflation rate is estimated to have increased by an average of 1.5 percent, remaining 1.5 percent below the central bank’s 3 percent target.
September
Govt revises downward GDP, revenue targets
Facing crisis impacts, government has reviewed downward its overoptimistic GDP growth targets and raised public debt expectations to the legal ceiling of 60 percent of the GDP as revenues continue underperforming due to domestic consumption remaining sluggish. In its review to the 2013-2015 macroeconomic framework approved by government on July 1, but published by the Finance Ministry only recently, the 2012 GDP growth forecast has been lowered to 3 percent, down from 4.3 percent in the initial budget and the public debt raised to 59.9 percent of the GDP, only 0.1 percent below the legal threshold.
Ashta hydropower plant made fully operational
Three months after its successful testing, the Ashta hydropower plant, a Euro 200 million investment by Austria’s Verbund and EVN has been made fully operational. The 48-MW run-of-river project, the fourth largest hydropower plant on the northern River Drin cascade and the biggest HPP project during the past 20 years, provides electricity for 100,000 Albanian households.
Austrian Lotteries officially declared winner
Austrian Lotteries has been officially announced the winner of 10-year licence to organize Albania’s first ever national lottery in a contested tender by participant companies and the opposition Socialist Party. A letter signed by Finance Minister Ridvan Bode announces the Austrian company as the winner of the tender with 90.7 points and its only rival bidder, the LTO Consortium with 76.5 points.
A complaint filed by the rival bidder was dismissed, says the ministry.
The national lottery process was marred by accusations by several companies who were disqualified from submitting bids and the opposition Socialist Party accusing government of corruption.
October
Credit growth drops to 6.5%, deposits up by 10%
Bad loans at a record high level of 21 percent, tighter lending standards and a sharp drop in demand by both businesses and individuals are seriously affecting Albania’s credit growth during this year. Latest central bank data show total lending grew by only 6.5 percent in the first eight months of this, almost half of the credit growth in 2012, reflecting the difficulty both businesses and consumers are facing as domestic consumption remains at low levels and new investments have been postponed.
The situation with deposits appears more stable due to consumers’ saving trend fearing harsher times ahead and the transfer of deposits by migrants in Greece. In Aug. 2012, total deposits grew by 10 percent to 930 billion lek, reconfirming the confidence citizens have in the Albanian banking system which is also proved by the indicators such as the loan-to-deposit ratio at 60.4% and the capital adequacy ratio at 15.9%, above the BoA’s minimum requirement of 12%.
Customs administration takes over excise collection
Starting from Oct. 1 the customs administration has taken over the collection of all excise tariffs, stripping the tax authorities of collecting excise on cigarettes, alcoholic beverages and domestically produced fuel by the ARMO refinery in an effort to improve excise collection, the second most important tax after VAT. The law approved last April amid debates foresees that the customs administration will take over the collection of all excise tariffs in line with European Union directives.
The new draft law will also be accompanied with some changes to excise rates for alcoholic beverages and tobacco. The draft law foresees the excise tariffs for beer with an alcoholic percentage with 6 percent and above will be raised by 20 percent.
Albanian oil magnate gets majority stake in Albpetrol
Albanian oil tycoon Rezart Taci is the owner of the majority 51 percent stake in the U.S based Vetro Silk Road Equity consortium which has been announced as the winner of an international tender to buy Albpetrol’s above-ground assets and the right to explore and exploit oil and gas in Albanian territory for 25 years.
Taci, 41, is already the owner of Armo oil refiner which he acquired back in 2008 for Euro 128 million, the biggest chain of retail petrol stations (Taci Oil), and most recently Albanian Screen TV. In a news conference on the consortium’s investment plans, Rezart Taci introduced himself as the owner of Singapore-based YPO Holdings which will have the majority 51 percent stake in Albpetrol oil firm. U.S based Silkroad Equity will have a 49 percent stake.
Economy grows by only 1% in year’s first half
After the slight shrink in the first quarter of 2012, the Albanian economy returned to growth in the second trimester driven by progress in the industry and post-telecommunication sector which overcame their negative growth rates. A report published by the country’s Institute of Statistics, INSTAT, shows the Albanian economy grew by 2 percent year-on-year in the second quarter of 2012 after the 0.2 percent shrink registered in early 2012 when severe weather conditions paralyzed the country. With an average growth rate of 0.9 percent during the first half of this year, the Albanian economy is reflecting clear signs of crisis from the Euro area partners and developments at home where domestic consumption and exports remains sluggish, and public debt at the legal ceiling of 60 percent of the GDP poses a real threat.
Insurance companies fined Euro 625,000 over price fixing
Eight insurance companies operating in Albania have been fined a total of 89 million lek (Euro 625,000) after the Competition Authority uncovered a price-fixing deal in compulsory motor insurance policy. The deal was made in February 2012 when all companies fixed motor insurance prices in a banned deal severely damaging competition.
The Competition Authority also recommends the implementation of the Bonus-Malus system in compulsory car insurance under which drivers with a clear driving record will pay less. ”
Doing businesses in Albania becomes more difficult
Albania lost three places in the Doing Business 2013 report although making it easier to start a business and pay taxes, according to a new report released this week by the World Bank and IFC. The report ranked Albania 85th among 185 economies, three places worse than in 2012, sandwiched between Croatia and Serbia but far worse compared to neighboring Macedonia and Montenegro which rank 23rd and 51st respectively. Dealing with construction permits ranks Albania with the worst global performance, 185th along with Eritrea.
Eagle Mobile one step from 3G licence
Albania’s Electronic and Postal Communications Authority (AKEP) has rated Eagle Mobile’s bid of Euro 4 million to get the third 3G licence with 100 points and given Plus Communication zero points for its symbolic 1 Euro 1 bid in a tender held earlier this month. Turkish owned Eagle Mobile offered 4.03 million Euros to get Albania’s third 3G licence in a bid which will probably make it the third mobile operator offering the 3G services in Albania. Meanwhile, Albanian-owned Plus Communication bid a symbolic 1 Euro on the 3G licence. AKEP officials said they will carefully examine bids before a decision is taken.
November
Banks increase profits despite bad loans hitting record 22.3%
Albania’s banking system improved its performance in terms of profits in the third quarter of 2012 despite non-performing loans registering new record high levels. Latest bank of Albania data show the 16 commercial banks operating in the country, which are overwhelmingly foreign owned, more than doubled their net profits to 3.14 billion lek (Euro 22 million) in the first three quarters of 2012, up from 1.31 billion lek (Euro 9.2 mln) in the same period last year, on lower expenditure on provisions which at 4.8 billion lek, was 2.3 times lower compared to the first three quarters of 2011. Nonperforming loans at the end of the third quarter of 2012 climbed to 22.3 percent, up from 21.17 percent in the previous second quarter and 19.47 percent in the third quarter of 2011.
Households, businesses struggling to pay off debts, BoA survey
One in three households and one out of two businesses already have a debt to pay and do not plan to borrow again in the next six months, a Bank of Albania survey published in the financial stability report for the first half of 2012 has unveiled. The results reconfirm the difficult situation both households and businesses are facing as crisis impacts in Albania escalate with domestic consumption failing to recover because of consumers’ falling purchasing power and their rising saving trend expecting harsher times ahead. The situation with businesses appears even more difficult with 56.4 percent of more than 700 surveyed businesses saying that have at least one debt to pay.
Government-CEZ conflict peaks, Arbitration divorce closer
The government-CEZ conflict reached its peak last weekend after CEZ cut power to debtor water supply companies leaving half of Albania without water and sparking nationwide protests which lasted for only few hours after police intervened arresting several CEZ employees and forcefully reconnected power. The warned extreme measure by CEZ on Nov. 16 left some of Albania’s key cities a without water supply for several hours forcing government to intervene after the company cut power to pumping stations in water supply companies which owe the distribution operator Euro 38 million. Following the reconnection of power to water supply companies later on Friday, Nov. 16, ERE’s board of commissioners held an emergency meeting deciding to start procedures for the removal of CEZ’s licence. The four conditions are related to the resumption of electricity imports to cover grid losses, the submission of the audited financial balance sheet for 2012, not making collective power cuts, and normalizing financial balance sheets.
CEZ, the Czech Republic’s largest power producer, is weighing an arbitration suit against the Albanian government and claims Euro 60 mln as a World Bank guarantee.
Ceiling lifted, Public debt to climb to 62.6% in 2013
Ruling majority MPs decided this week to abrogate an article of the budget law which makes it compulsory for public debt to stay within 60 percent of the GDP, arguing that the increase in public debt will help promote economic growth in these times of crisis and secure power supply for the country. Opposition Socialist Party MPs of the parliamentary economy committee described the move as harmful to the Albanian economy and the management of the public debt already at its legal ceiling of 60 percent of the GDP, saying that a dangerous precedent was being set.
Speaking this week after introducing the monthly monetary report, Bank of Albania governor Ardian Fullani called for a new fiscal rule after the removal of the 60 percent of the GDP public debt ceiling, implying that the central bank does not approve of a situation where public debt limits are legally undetermined. He called on the political class to approve a clear fiscal rule on public debt. Public debt is expected to climb to 62.6 percent of the GDP in 2013.
December
2012 budget cut by Euro 111 mln under normative act
Under a normative act approved in silence on Wednesday, government cut budget for the third year in a row after failing to meet its meet its overoptimistic targets. For 2012, government has cut spending by 15.8 billion lek (Euro 111 million) to 381 billion lek and revenues from 355.7 billion lek to 332.7 billion lek. Meanwhile, the budget deficit has been raised to 48,368 billion up from an expected 41.163 billion lek under the initial 2012 budget. Investments have also been cut to 64.7 billion lek, down from 69.8 billion lek. Prime Minister Sali Berisha did not comment on the expected budget cuts following poor performance in the first ten months of the year. Back in 2011 and 2010 government made mid-year budget cuts and also used normative acts at the end of the year to adjust the budget. The budget cuts come after government increased wages and pensions by an average of 5 percent last July.
