Albanian economy lags behind EU aspirants

Albania’s growth in the second quarter of 2014 was higher only compared to Serbia which was affected by severe spring floods in May 2014 and shrank by 1.1 percent.
TIRANA, Oct. 8 – The slight moderate shrink in the second quarter of 2014 has placed the Albanian economy again among the worst EU aspirants after registering the third highest growth in the first quarter of the year.
At 0.6 percent in the second quarter of 2014, Albania registered the second poorest growth rate among the eight candidate and potential candidate countries, according to a report by the European Commission’s Directorate-General for Economic and Financial Affairs. Albania’s growth in the second quarter of 2014 was higher only compared to Serbia which was affected by severe spring floods in May 2014 and shrank by 1.1 percent. No data are available for Bosnia and Herzegovina and Kosovo which remain the only EU potential candidates after Albania was granted candidate status last June.
“Albania’s growth in the second quarter surprised on the downside as the economy, pulled down also by a high base effect, recorded a 0.6 percent contraction from the same period last year. Budgetary performance remained on track in the first eight months. Reflecting rate hikes at the beginning of the year as well as efforts to improve tax collection, revenues increased by 12.5 percent year-on-year (+1 percent compared to plan), driven by a 16.3 percent year-on-year surge in VAT, the largest item on the revenue side,” says the report.
Growth in Montenegro, Iceland, Turkey and Macedonia ranged from 0.3 percent to 4.3 percent in the second quarter of 2014.
After being one of the best performing enlargement economies from 2009 to 2012, at 1.4 percent in 2013 Albania’s growth dropped to the poorest performer among the EU aspiring countries.
Growth performance in the Western Balkans generally deteriorated during the second quarter after Albania, Bosnia and Herzegovina, Montenegro and Serbia experienced a significant slowdown in economic activity, or even negative growth in the case of Serbia and Albania, confirming once again the fragility of the recovery that started in 2013.
The slowdown was primarily due to sharp falls in industrial production, in particular energy and electricity production Montenegro, Albania and, in the case of Serbia, a continued decline in investment, which was aggravated by pre-election uncertainties, says the European Commission report.
Albania’s non-performing loans at 24 percent and public debt at around 70 percent of the GDP are the highest among EU aspirants, posing a serious barrier to growth.
Albania’s GDP per capita expressed in purchasing power standard, an artificial currency unit that eliminates price level differences between countries, was at 30 percent of the EU 28 in 2013, leaving behind only EU potential candidate Bosnia and Herzegovina with 29 percent of the EU 28 in the list.
Eurostat estimates Albania’s GDP per capita rose to 3,344 euros in 2012, up from 3,329 euros in 2011, ranking the lowest among EU candidate and potential candidate countries and at only 13 percent of the 24,600 euros of the EU- 27 average.