The central bank estimates that the payment of accumulated unpaid bills as part of a nationwide campaign to curb thefts and power losses of around Euro 150 million a year affected consumption in the final quarter of 2014
TIRANA, May 13 – The severe floods that hit southern Albania last February and a reduction in domestic oil production in response to declining international fuel prices have slowed down the Albanian economy in early 2015, says the central bank.
In a monetary policy report for the first quarter of this year, the central bank says “the economic growth in this period is estimated to have undergone a temporary slowdown due to damage caused by floods in the agricultural and livestock sector but also a reduction in oil production in response to lower prices in international markets.”
Floods that hit southern Albania in February are estimated to have affected the livelihoods of 42,000 people and caused direct damage of some Euro 10 million, says the European Commission in a report.
Meanwhile, declining prices in international markets have forced oil companies to reduce production affecting exports and royalties to the Albanian government.
The higher than expected inflation rate in the first quarter of this year fuelled by floods making agriculture products more expensive has also forced the central bank to slightly revise downward its 3 percent GDP growth forecast for 2015. Both government and the IMF expect the economy to accelerate to 3 percent this year, up from 1.9 percent in 2014.
The central bank estimates that the payment of accumulated unpaid bills as part of a nationwide campaign to curb thefts and power losses of around Euro 150 million a year affected consumption in the final quarter of 2014.
“The payment of accumulated unpaid bills and a drop in confidence made consumers more hesitant about spending in this period. This was mostly reflected on lower consumption of services and big purchases,” says the central bank.
“The incomplete utilization of the labour market and production capacity among businesses is keeping the economic activity below its potential and the inflation rate below the central bank’s target,” said the report.
The central bank expects Albania to register a higher growth rate compared to 2014 when it grew by 1.9 percent on increased consumption and private investments.
An easier fiscal policy, the shift of government borrowing from the internal market to foreign markets and improving situation in top trade partners Italy and Greece are expected to have a positive impact.
Inflation rate is estimated to have increased by 1.9 percent in the first quarter of this year, remaining below the central bank’s 3 percent target estimated to have a positive impact on both consumption and investments.
