TIRANA, July 17- The European Commission has put an emphasis on the slowdown of Albania’s economic growth and consumption during the first quarter of the year in its quarterly periodic review of economic developments in potential candidate countries, also explaining the reasons of this tendency. “Real GDP growth in Albania continued to slow by 3.1 [percent in the last three months of 2018, to 2.2 percent in the first quarter of 2019,” the report said.
On demand, private consumption fell again, but it remains the strongest growing component in the first quarter by 2.25 percent more, while government consumption rose slightly by 0.5 percent. The decline in energy production affected the growth slump, which was somewhat compensated by the expansion of services. The report adds that gross fixed capital formation grew at slower rates of 1.8 percent compared to the last quarter of 2018, reducing its contribution to 0.4 percentage points. Exports of goods and services almost stagnated in real terms, with a 0.5 percent increase.
Exports of services stopped falling, reaching up to 3 percent real growth and contributed to GDP growth by 0.8 percent driven mainly by production and other services. In quarterly terms, exports recorded a slight increase of their share to GDP at 28.5 percent, but remained 1.5 percentage points below the level in the corresponding quarter of 2018. Import growth, especially services, slows slightly from 2.6 percent to 2.5 percent, reducing the import share in GDP by 1 percentage point to 41.6 percent compared to the first quarter of 2018. As in the last quarter of 2018 the net exports dropped 0.9 percentage points of GDP growth.
On the supply side, electricity and water production continued to fall due to low rainfall. Electricity production reached only one-third of the high recorded last year and, coupled with poor mineral production, contributed to lower industrial value-added by -5.8 percent in real terms despite moderate growth of 4.4 percent of the processing industry. In contrast, service growth accelerated and became more diverse with information, communication, financial and real estate services, making the main growth drivers in the first quarter. Low output of electricity and minerals also damaged the export of goods, which increased by only 3 percent, despite the growing exports of processed products.
The report says the labor market was positive and employment increased by 1.5 percentage points in the first quarter. Salaries also increased by 4.9 percent. The budget resulted with surplus, mainly as a result of low capital spending, which was 20 percent lower than the same period in 2018. Taxes and contributions increased, while VAT dropped. Public debt was stable at 68.1 percent of GDP in the first quarter.
Loans grew by 6 percent in the first quarter, adjusted by the exchange rate effect and loan write-offs. Unrequited loan repayments rose again in March, but remained 2.2 percentage points less than the same period in 2018. Business credit was accelerated, while consumer spending slowed down reflecting the lower consumer loan demand.
