TIRANA, April 6 – The Albanian economy slightly accelerated to 1.9 percent in 2014 after quarterly GDP growth rates were revised upward but yet failed to meet the 2.1 target set by both government and the IMF due to a slowdown in the final quarter of the year.
Data published by the country’s state statistical institute, INSTAT, show the Albanian economy grew by 1.89 percent in 2014, up from an average of 1.2 percent in the previous two years, an average of 3.5 percent annually in the 2009-2011 period and a pre-crisis decade of 6 percent.
The lower than expected growth in 2014 was affected by a slowdown in the final quarter of the year when the economy grew by 2.42 percent year-on-year affected by negative growth rates in key sectors such as agriculture and post and communication.
Quarterly GDP growth rates for 2014 were significantly revised upward in the latest INSTAT publication with the GDP for second quarter of the year, upgraded to -0.18 percent, up from an initial estimate of -0.61 percent. The GDP for the first quarter of the year was also revised to 1.64 percent, up from 1.42 percent earlier while the GDP for the third quarter of the year was reviewed to 3.86 percent, up from an initial flash estimate of 3.3 percent.
The 1.89 percent GDP growth rate for 2014, which is subject to further review by INSTAT, is almost in line to what government and international financial institutions had forecast for the Albanian economy.
The Albanian government and the IMF and World Bank which are assisting in reforms through lending and expertise, expect the country’s economy to accelerate from 2.1 percent in 2014 to 3 percent in 2015, 4 percent in 2016 and 4.5 percent in 2016 and 2017.
Meanwhile, London-based EBRD has revised downward its 2014 growth forecast for Albania’s to 1.5 percent, down from 1.7 percent, citing weak external demand and expects the Albanian economy to slightly accelerate to 2.5 percent for 2015.
The EBRD had earlier warned spillover impacts from top trade partners Italy and Greece continue having a negative impact on Albania’s economy. “Albania’s strong trade, investment and remittance ties to Greece and Italy, both of which face continued economic gloom, are likely to continue to constrain growth and the high level of public debt will limit the room for fiscal manoeuvre.”
The Vienna Institute for International Economic Studies, which is one of the top centres for research in Central, East and Southeast Europe, has revised upward Albania’s GDP growth for the next three years, but the forecasts remain less optimistic compared to expectations by the Albanian government and top international financial institutions.
Citing reforms in the energy system and a recovery in foreign direct investment in energy infrastructure, the Vienna Institute for International Economic Studies has upgraded its forecast for 2014 to 1.5 percent and expects the Albanian economy to grow by 2 to 2.4 percent in the 2015-2017 period, which is around 1 percent higher compared to its previous forecast last November.
INSTAT data shows the services sector represented by ‘trade, hotels and restaurants,’ transport, post and communication and ‘other services’ which include financial activities, real estate, public administration, education and health accounted for 50.3 percent of the GDP at the end of 2013, down from 51.6 percent in 2012 and around 57 percent in 2007 just before the onset of the global financial crisis.
Second comes agriculture, forestry and fishing which despite employing around half of the country’s population provided 22.6 percent of the GDP in 2013, up from 21.8 percent in 2012 and 19.4 percent in the 2008-2009 period. Industry has considerably increased its share to the GDP in the past few crisis years mainly as a result of successful oil and mining concessions but also the traditional garment and footwear products. Industry accounted for 15.1 percent of the GDP in 2013, up from 14.4 percent in 2012 and 11.4 percent in 2008. Within this group oil extraction and mining provided 6.1 percent of the GDP in 2013, up from only around 1 percent in 2007 mainly as a result of a sharp increase in oil production by Canada-based Bankers Petroleum.
The long-ailing construction sector, once a key driver of the economy, has seen its GDP share drop from 18 percent in 2008 to 12 percent in 2013.
2015 prospects
Albania prospects received a blow in early 2015 when severe floods hit southern Albania, causing considerable damage to the agriculture sector, including local products, livestock and infrastructure, which is expected to have an impact on the GDP growth for this year.
However, top trade partners Italy and Greece escaping recession and the start of the Trans Adriatic Pipeline construction are expected to have a major impact on the Albanian economy in 2015 when government and international financial institutions expect a recovery to 3 percent after sluggish GDP growth rates of 1 to 2 percent in the past three years.
Public debt at around 70 percent of the GDP, non-performing loans at around a quarter, lending struggling to remain at positive growth rates and a slowdown in foreign direct investment and exports are considered key barriers to Albania’s 2015 growth prospects.
