TIRANA, Oct. 13 – The Albanian economy has moderately recovered in the first half of this year, but continues lagging behind the majority of its regional EU aspirant competitors, according to a report by the European Commission.
At 2.5 percent for the second quarter of 2015, Albania’s GDP growth was higher only compared to Serbia’s 1 percent among seven candidate and potential candidate EU countries which also include Macedonia, Montenegro, Turkey, Bosnia and Herzegovina and Kosovo.
The European Commission has maintained unchanged Albania’s GDP forecast for 2015 expecting growth to accelerate to 3 percent in 2015 and 3.6 percent in 2016, which is among the highest in the region.
The forecast for 2015 is slightly higher compared to expectations by the Albanian government which has revised downward this year’s prospects to 2.7 percent on lower international oil prices and spillover effects from the escalation of the Greek debt crisis.
The report praises Albania’s successful fiscal consolidation efforts but warns they must not affect much-needed capital investment.
“As a common feature in the region, fiscal consolidation and adjustment often happens at the cost of reducing or delaying much-needed capital investment, thus undermining the evolution towards a more growth-enhancing pattern of public spending,” says the Commission.
The report notes Albania recorded the strongest reduction in non-performing loans which dropped by 4 percent to 20 percent, leaving Serbia with the highest NPL ratio in the region with 22.8 percent in the second quarter of 2015.
“In Albania, despite favourable liquidity conditions, credit growth turned negative in August as a fall in lending to firms outweighed stronger lending to households,” says the report.
In its winter 2015 European Economic Forecast, the European Commission said foreign direct investment in Albania will get a boost from the start of the Trans Adriatic Pipeline bringing Caspian gas to Europe and several major investments in hydropower projects.
“Vulnerabilities linked to growing external imbalances will be mitigated in the years to come by an expected strong inflow of foreign direct investment, related in particular to the Albanian section of the Trans-Adriatic Pipeline and a major hydropower project [the Devoll HPP],” says the Commission.
“Downside risks emanate however from the possible fiscal impact of electricity sector woes and the scheme that pays compensation for property expropriated during communism,” warns the report.
During the global crisis years of 2009 to 2012 Albania was among the best performers at a time when most regional countries suffered negative growth rates.
The Albanian economy registered an annual growth rate of 2.53 percent in the second quarter of 2015 fuelled a recovery in the long-ailing construction sector and a boost in the domestic hydro-dependant electricity generation, according to a report issued by INSTAT, the state statistical institute. The GDP grew by 2.65 percent in the first half of this year and is on track to achieve its new revised target of 2.7 percent for 2015.
Revised INSTAT data shows the Albanian economy grew by 2.17 percent in 2014, up from 1.11 percent in 2013, 1.42 percent in 2012, an average of 3 percent in 2010 and 2011 and a pre-crisis decade of 6 percent.
