TIRANA, July 15 – The Albanian economy grew by an annual 3 percent in the first quarter of this year fueled by a tough late-2015 nationwide campaign against informality formalizing thousands of previously unregistered businesses and the ongoing construction of some major energy-related projects by foreign investors, according to a GDP report published by INSTAT, the state statistical institute.
The first quarter growth is almost in line with the government’s expectations of a 3.4 percent growth for 2016, which are slightly more optimistic compared to the central bank and international financial institutions forecasts of 3 to 3.2 percent.
The positive first quarter performance comes at a time when exports continued to remain at negative growth rates due a slump in international oil and mineral prices affecting some of Albania’s key exports.
Meanwhile, household consumption returned to modest positive growth of 1.4 percent in the first quarter of the year, apparently fueled by the formalization of thousands of businesses previously operating informally.
“Trade, hotels, restaurants and transport” and “the public administration, education and health” were the key drivers of Albania’s growth in the first quarter of the year, contributing by 0.85 and 0.6 percentage points to the GDP growth respectively. Net taxes also contributed by 0.39 percentage points to the first quarter growth.
While public investments slightly contracted in the year’s first quarter, the construction sector had a positive 0.55 percentage point contribution mainly as a result of private investments, including the major TAP gas pipeline and the Devoll hydropower plant by Norway’s Statkraft.
The “industry, energy and water” group had a negative contribution of 0.3 percent mainly due to the ailing extractive industry, negatively affected by a sharp cut in international commodity prices since mid-2014.
What’s concerning is that the key agriculture sector, employing about half of the country’s population, but accounting for only 20 percent of the GDP, failed to return to positive growth rates for the sixth quarter in a row.
INSTAT slightly revised upward Albania’s 2015 growth to 2.77 percent, up from a previous 2.6 percent, but what’s surprising is that the 2011 growth was initially revised upward by more than 3 times to 8.46 percent, up from a previous 2.5 percent, but INSTAT later corrected the figure to 2.55 percent. While no official explanation is provided for the huge gap, INSTAT attributes the reviews to the continuous revisions and methodology changes.
Despite the economy slightly accelerating to 2.6 percent in 2015, household consumption declined by 0.17 percent in 2015 following modest growth rates in the previous five years.
The Albanian government expects the country’s economy to grow by 3.4 percent in 2016, following growth rates of 1 to 3 percent since the onset of the global crisis in 2009 and a pre-crisis decade of 6 percent. However, several international financial institutions, including the World Bank, have already revised down Albania’s growth prospects to 3.2 percent on declining exports due to a sharp decline in commodity prices.
The sharp decline in international oil and base metal prices has already negatively affected investment, jobs and government revenue from the royalty tax in one of the top exporting industries and is seen as the key threat to Albania’s growth prospects for 2016.
