INSTAT data show the Albanian economy grew by 1.6 percent year-on-year in 2012, the worst annual rate since the collapse of the notorious pyramid schemes in 1997 when the economy shrank by 11 percent and almost half of the average 3 percent annual growth from 2009 to 2011
TIRANA, April 2 – Affected by the Eurozone crisis, sluggish domestic consumption and high public debt levels, the Albanian economy registered its worst economic performance in the past 15 years in 2012. Data published by the country’s government controlled Institute of Statistics show the Albanian economy grew by 1.6 percent year-on-year in 2012, the worst annual rate since the collapse of the notorious pyramid schemes in 1997 when the economy shrank by 11 percent and almost half of the average 3 percent annual growth from 2009 to 2011.
In the final quarter of 2012, the Albanian economy grew by 1.7 percent year-on-year and 0.1 percent compared to the third quarter of the year. Post-telecommunication, industry and “other services” were the branches registering the highest year-on-year growth rates in the final quarter of 2012. Meanwhile, construction, transport, trade, hotels and restaurants registered negative growth rates.
The performance clearly reflects negative impacts from crisis-hit EU top trade partners Italy and Greece and problems at home where consumption remains sluggish and bad loans have reached a record 23 percent. Public debt already beyond the 60 percent of the GDP limit, and credit and deposits growth rates slowing down complete the grim picture of the Albanian economy in 2012 when international financial institutions expect growth to range between 0.5 to 0.8 percent citing spillover impacts from the Eurozone crisis and high public debt levels.
The services sector, which accounts for around 60 percent of the GDP, registered growth rates in “Post-telecommunication,” and “other services” segments but the “transport” and “trade, hotels and restaurants” sectors posted negative growth rates.
Post-telecommunication, accounting for 3.3 of the GDP, grew by 24 percent year-on-year and 6.3 percent compared to the third quarter of 2012. “Other services” which represent 27.5 percent of the GDP grew by 7.8 percent year-on-year and 0.1 percent compared to the third quarter of 2012.
The transport sector made up of railway, maritime, air and travel agencies, and accounting for 6.2 percent of the GDP, shrank by 8.4 percent compared to the final quarter of 2011, but was up by 5 percent compared to the third quarter of the year.
“Trade, hotels and restaurants,” which INSTAT values at 21 percent of the GDP, shrank by 1.7 percent in the final quarter of the year but remained unchanged compared to the third quarter of the year, reconfirming the negligible impact tourism, as one of the most promising sector of the economy, had on the GDP growth.
The industry sector dominated by manufacturing which accounts for 10.4 percent of the GDP and extractive branch with 1.4 percent grew by 7.8 percent in the final quarter of the year and but was down by 4.8 percent compared to the third quarter of the year.
Agriculture which employs around half of the Albanian population but provides only around 20 percent of the GDP continued having a positive contribution to GDP, growing by 6.1 percent year-on-year and 1.6 percent compared to the third quarter of the year.
The construction sector, once the key driver of the Albanian economy, but now accounting for only 11 percent of the GDP, declined by 15.4 percent year-on-year, and was also 1.4 percent down compared to the third quarter of the year. In crisis since 2008, due to falling purchasing power especially from crisis-hit migrants, the construction sector has failed to recover during the past four years also due to lending standards becoming tighter as bad loans stand at a record 22 percent. Unpaid government bills for finished construction works and difficulty in obtaining new construction permits has also influenced.
Eurozone crisis impact
The GDP growth rate for 2012 is almost twice higher compared to forecasts by international financial institutions such as the IMF and the World Bank which expected the Albanian economy to grow between 0.5 to 0.8 percent in 2012 and around 1.5 percent in 2013, citing impacts from Eurozone crisis and public debt.
The Albanian economy shrank by 0.2 percent in the first quarter of 2012 and grew by 2.1 percent in the second quarter of the year, registering the poorest first-half performance since the collapse of the notorious pyramid schemes in 1997. In the third quarter of 2012, the economy grew by 2.7 percent, registering an average growth of 1.5 percent during the first three quarters of the year.
Lower domestic consumption, stagnating exports, some of the key industries in crisis, lending and deposits growth rates slowing down and government revenues far below targets are some of the symptoms of the ailing Albanian economy in 2012.
The escalating Eurozone crisis and especially the situation in Greece and Italy, Albania’s top trade partners and hosts to more than 1 million migrants, is expected to further aggravate matters. The IMF expects Italy, the destination of around half of Albanian exports to face recession in 2012 and 2013. Neighbouring Greece whose influence on Albanian trade and investments has been declining is expected to face another year of recession.
“Albania’s strong trade, investment and remittance ties to Italy and Greece are likely to continue to constrain growth in the coming year, and public debt, which is close to the statutory limit of 60 per cent of GDP, will limit the room for fiscal manoeuvre,” says London-based EBRD.
Albania enjoyed an average annual growth rate of 6 percent from 2003 to 2008 and was one of the few countries to register positive growth of 3.3 percent in 2009 in the outbreak of the global crisis. According to INSTAT, the 2010 growth was at 3.9 percent, down from 7.5 percent in 2008. Back in 2011, the Albanian economy grew by 3.1 percent, remaining at the same moderate growth rates for the third year in a row. Despite having preserved an annual moderate 3 percent growth rate from 2009 to 2011, the Albanian economy lags behind almost every EU aspirant in GDP per capita and purchasing power indicators.
For the first time since 1997 when the notorious pyramid schemes collapsed and the economy suffered a sharp 11 percent shrink, government revenues have suffered an annual drop, revealing the escalating woes of the Albanian economy since the onset of the global crisis in 2009. Finance Ministry data show total revenues shrank by 0.2 percent to 330 billion lek (Euro 2.3 billion) in 2012, registering the first annual shrink in the past 15 years. The performance proves the escalation of impacts from the global crisis and rising public debt now standing above the former 60 percent of the GDP ceiling.
For the first time in the past decade, public debt has officially jumped above the former 60 percent of the GDP statutory limit, posing a real threat to Albania’s macro-economic stability as crisis impacts from the Eurozone intensify. Finance Ministry data show Albania’s total public debt climbed to around 828 billion lek or 61.51 percent of the GDP at the end of 2012, with domestic debt accounting for 34.94 percent and external debt at 26.57 percent.
Total debt service in 2012 climbed to 52.16 billion lek, up from 48.7 billion lek in 2011, accounting for 3.88 percent of the GDP, up 0.12 percent compared to 2011.
Turnover indices
Short-term statistics published by INSTAT ahead of the GDP for the final quarter of 2012 show the turnover index in industry, construction, trade and other services grew by 1.7 percent compared to the final quarter of 2011 and was up by 0.8 percent compared to the third quarter of 2012. Employment in these sectors rose by an average of 7 percent year-on-year while salaries rose by 2.5 percent.
The turnover index in the industry sector, rose by 4.5 percent year-on-year but was down by 9 percent compared to the third quarter of 2012. Employment in this sector which accounts for 10 percent of the GDP and is dominated by manufacturing dropped by 0.8 percent year-on-year while salaries rose by 4.1 percent.
The construction sector, in crisis since 2007, suffered a 13.3 percent shrink year-on-year, cut 11 percent of its staff and lowered salaries by 11.4 percent.
In the wholesale trade, the turnover index dropped by a minor 0.1 percent year-on-year. The number of employees grew by 8.1 percent and wages were raised by 11.5 percent.
Hotels saw their turnover index rise by around 30 percent in the final quarter of the year. Hotels increased their staff by only 1.1 percent but cut wages by around 5 percent.
In the transport sector, the turnover index in the final quarter registered declines in the railway, maritime, and air transport as well as travel agencies.
The post-telecommunication sector saw its turnover index drop by 2.1 percent year-on-year.
