The declining imports of machinery, equipment and spare parts shows Albanian businesses are investing less in 2013 affected by sluggish consumption and a saving trend by consumers
TIRANA, June 24 – At a time when the Albanian economy continues suffering with domestic consumption and lending remaining sluggish, exports which in the first five months of this year grew by double digits remain the key driver of the Albanian economy. Driven by a sharp increase in electricity exports because of the favourable hydro situation in the first five months of this year, Albanian exports grew by16 percent year on year in the first five months.
Albania’s Power Corporation KESH exported around 30 million euros of electricity during the past few months following heavy rains improving the hydro-situation in the country’s northern Drin cascade where the three biggest HPPs are situated. However, since mid-June Albania has suspended electricity exports to handle the country’s needs during the drought summer period with its own abundant hydro electricity reserves.
Exports of “minerals, fuels and electricity” rose by a record 38 percent to around 40 billion lek (Euro 274 million) in the first five months ranking the top Albanian exports. Meanwhile, exports of garment and footwear products, the traditional top Albanian exports until 2011, continue suffering crisis impacts from crisis-hit EU partners and difficulty in entering new markets. Garment and footwear exports, whose overwhelming majority of more than 80 percent has Italy as its destination grew by 6.5 percent in the first five months of this year, overcoming the slight decline in 2012.
Exports of construction materials and metals were at 14.3 billion lek, almost unchanged compared to the first five months of 2012.
While Albania’s exports continue preserving a double digit increase, the moderate decrease in imports has positively contributed to the narrowing of the trade deficit. At 192 billion lek, Albanian imports during the first five months of 2013 were 5.5 percent lower compared to the same period in 2012, mainly due to lower fuels and electricity imports.
The declining imports of machinery, equipment and spare parts show Albanian businesses are investing less in 2013 affected by sluggish consumption and a saving trend by consumers. In the first five months of this year, imports of machinery and equipment shrank by 10 percent to 34.7 billion lek.
Data show crisis hit Italy and Greece continue remaining Albania’s top trade partners with Italy accounting for around 38 percent of trade exchanges in May 2013 and Greece having dropped to 6.7 percent. In the first five months of 2013, Italy accounted for around 50 percent of Albanian exports and 34.5 percent of total imports. Neighbouring Greece which is suffering its sixth consecutive year of recession, now ranks the fifth most important destination of Albanian exports after Spain, Kosovo, China and Germany and the second most important destination only for imports with around 10 percent. Spain has emerged as the second most important destination of Albanian exports mainly due to oil exports by Canadian-based Bankers Petroleum. Neighboring Kosovo ranks the third top destination with around 6.5 billion lek in the first five months of 2013, up 15 percent compared to the same period in 2012.
Albania’s budget deficit reached a record high for the first five months of this year on higher public investments ahead of the June 23 general elections and underperforming government revenues. A report issued by the Finance Ministry shows Albania’s budget deficit rose to 38.3 billion lek (Euro 266 million) in the first five months of this year, up 114 percent compared to the same period last year when it was at 17.8 billion lek. A sharp increase in public investments ahead of the June 23 general elections and a slowdown in government revenue which remain at negative growth rates are the main causes for the situation which risks further increasing Albania’s public debt stock, currently hovering above the former 60 percent ceiling.
Data show that consumption, the key driver of Albania’s growth, continues remaining poor with the value added tax, which indirectly measures it, shrinking by 5.4 percent year-on-year in the first five months of this year.
The poor performance shows government’s goal of an 8 percent growth in revenues and a 3 percent GDP growth rate for 2013 will be difficult targets to achieve after last year’s 1.6 percent GDP growth rate, the worst since the collapse of the notorious pyramid schemes in 1997 and almost half of the average growth in the 2009-2011 global crisis years.
