By Ervin Lisaku
TIRANA, Jan. 11 – The Albanian economy grew by 3 percent in the third quarter of 2015, hinting the economy is on track to achieve its revised 2.7 percent growth target, state statistical institute, INSTAT, said in a report this week.
The long-ailing construction industry had the biggest 1.45 percentage point contribution to the economy in the third quarter of the year, apparently fuelled by public investments and major private investments in the hydro-electricity and gas infrastructure. The construction sector which has been struggling to recover since the onset of the global financial crisis in 2008 grew by 16.5 percent year-on-year in the third quarter of the year.
However, “trade, hotels, restaurants and transport” were up by only 1.52 percent during the peak tourist season.
The agriculture sector which employs about half of the country’s population but provides only 20 percent of the GDP was down by 1.4 percent year-on-year, apparently hit by floods in early 2015.
INSTAT reports household consumption returned to positive growth in the third quarter of 2015 when it grew by 1.9 percent year-on-year following contraction in the previous two quarters.
The state statistical institute also revised upward the GDP for the second quarter of the year to 2.96 percent and slightly revised it down to 2.24 percent for the first quarter of 2015 when the country was hit massive floods.
Data shows the Albanian economy grew by an average of 2.7 percent in the first three quarters of 2015 and is on track to achieve its target, revised downward by 0.3 percent because of a sharp fall in international oil prices and spillover effects from the escalating crisis in neighboring Greece, the country’s second top trading partner and top foreign investor.
Sluggish domestic consumption, public debt at around 72 percent of the GDP, non-performing loans at 20 percent, exports and lending struggling to recover to positive growth rates and an ongoing decline in migrant remittances hint Albania will face another tough year after the economy is expected to have accelerated to 2.7 percent in 2015 following poor growth rates of 1 to 2 percent in the 2012-2014, an average of 3 percent in 2010 and 2011 and a pre-crisis decade of 6 percent.
The 2016 prospects for the Albanian economy are mixed despite forecasts of a slight recovery fuelled by an expected boost in energy-related foreign direct investment and positive effects from reforms in the energy sector and the nationwide campaign against informality.
Foreign direct investment prospects for 2016 seem more optimistic as the major Trans Adriatic Pipeline bringing Caspian gas to Europe has already launched its construction works in its Albania section and Norway’s Statkraft continues the construction of Devoll hydropower plant, the biggest investment in renewable energy in the past three decades in Albania.
The uncertain economic outlook on Albania’s top trading partners is also expected to continue having a negative impact on Albania’s economy in the next couple of years.
A modest recovery in Italy and a new recession in Greece will further affect Albania’s exports, investments and remittances from the two neighboring countries, the hosts of more than 1 million Albanian migrants.
A sharp decline in international oil and base metal prices has also strongly affected investments and jobs and government revenue from the royalty tax in one of the top exporting industries.
In its newly adopted 2016 budget, the Albanian government expects the economy to slightly accelerate to 3.4 percent, up from an expected 2.7 percent in 2015, recently revised downward on lower international oil and base metal prices affecting exports and spillover effects from the crisis in neighboring Greece.
