TIRANA, June 18 – Albania’s exports enjoyed comfortable double-digit growth in the first five months of this year despite Europe’s single currency having lost considerable ground against Albania’s national currency and negatively affecting the country’s exports, two-thirds of which are destined for Eurozone countries.
The country’s poorly diversified exports grew by an annual 18.4 percent to about 131.37 billion lek (€1 billion) in the first five months of this year, preserving their double-digit growth rates for about one and a half years now, according to INSTAT, Albania’s state-run statistical institute.
Growth in exports of garment and footwear products, Albania’s traditionally top exports, recovered to an annual 11.7 last May, following a slowdown to 5 percent last April, apparently hit by the depreciation of the euro against the Albanian lek. Their growth for the first five months of this year was at an annual 10.5 percent.
Overwhelmingly destined for Italy, the Eurozone’s third largest economy and Albania’s main trading partner, the garment and footwear industry has been the country’s hardest hit due to the low value added exports it produces as the raw material is overwhelmingly imported from Eurozone countries and labour costs and taxes are incurred in the national currency, lek.
Relying on cheap labour costs, the locally known “faà§on” industry, employs some 100,000 workers, being one of the key private sector employers. However, some exporters say they have been forced to cut staff to handle huge losses from the euro’s free fall during this year.
Garment and footwear companies in Albania have been facing rising difficulty in finding new workers in the past few years amid hesitation and refusal of potential employees to work for low wages, rising competition by call centers offering much better benefits and a new migration wave.
The sector is mostly involved in cut-make-trim production and overwhelmingly imports raw materials, designs and patterns but there are also a few emerging ‘Made in Albania’ brands that have upgraded to full cycle production.
This year’s double digit growth in exports comes as Europe’s single currency fell to a 10-year low of 126.28 lek at the end of May 2018, down from 134.87 in mid-May 2017, having depreciated by an annual 6.4 percent against Albania’s national currency which is trading at one of its highest levels against Europe’s single currency since the euro’s 2002 launch.
In addition to exporters, the euro’s free fall in first half of this year has also negatively affected local producers facing tougher competition from now cheaper imports and thousands of poor households relying on remittances from their family members mainly in Italy and Greece where 1 million Albanian migrants live and work.
Europe’s single currency dropped to 125.77 lek on Monday after temporarily gaining ground following the Albania’s central bank’s emergency intervention to buy excess euro from the local currency exchange market in a bid to curb supply.
The recovery of Albania’s exports during this year was fuelled by ‘construction material and metals” as well as rising crude oil sales and the resumption of electricity exports following heavy rainfall having considerably improved the country’s hydro-dependent domestic electricity generation since late 2017.
Albania was forced to make costly electricity imports of about €200 million in the second half of 2017 after one of the worst droughts in decades paralyzed the country’s hydropower generation.
Imports also grew by 6.9 percent over January-May 2018 but the country’s trade gap slightly narrowed by 3 percent to 124 billion lek (€983 million) in the first five months of this year. Imports of ‘machinery, equipment and spare parts’ an indicator of the level of investment, grew by about 14 percent to 56.7 billion lek (about €450 mln), topping the country’s import list. Imports of this group in the past few years have been fuelled by imports of pipes and machinery for the two TAP and the Devoll Hydropower, the country’s two major energy-related investment whose investment stage is set to complete by the end of this year.
A net importer, exports covered only slightly more than a half of Albania’s imports in the first five months of this year.
Italy, Greece, China and Germany were Albania’s top trading partners for the first five months of this year with traditional top trading partner Italy accounting for more than a third of Albania’s total trade exchanges.
Due to crude oil being overwhelmingly destined for exports following the late 2017 bankruptcy of a local refiner, Spain emerged as the second largest destination of Albanian exports for the first five months of this year with exports there having doubled to 10.6 billion lek (€84.3 mln).
Trade exchanges with neighboring Kosovo, the second largest destination of exports in the past few years, only modestly rose in January-May 2018 amid concerns over tolls Albania plans to impose on its part of the highway linking the two countries.
Albania’s exports grew by 12 percent in 2017 following modest growth of 0.1 percent in 2016 and a 5 percent decline in 2015 triggered by a sharp cut in commodity prices affecting Albania’s key oil and mining exports.
Albania’s exports are currently poorly diversified with three-quarters of them relying on ‘garment and footwear,’ ‘minerals, fuels and electricity’ and ‘construction materials and metals,’ exposing the country’s economy to industry-specific shocks such as the mid-2014 slump in commodity prices.
