TIRANA, April 18 – The Albanian economy is estimated to have made a poor start in early 2016 after growing by 2.6 percent in 2015.
A survey conducted by the country’s central bank shows the country’s economic sentiment indicator (ESI), measuring both business and consumer confidence, dropped by 5.7 percentage points in the first quarter of this year, plunging below its long-term historical average after three quarters of positive performance.
“The performance of this indicator was determined by a confidence drop in all sectors of the economy with the sharpest decline in the construction sector,” said the central bank.
Capacity utilization rates also registered considerably declines ranging from 2.9 percent to 9.5 percent in all industry, construction, services and trade sectors.
The long-ailing construction sector registered a 16.7 confidence drop in the year’s first quarter, plunging 9 percentage points below its 2008-2015 average on lower demand, production and employment indicators.
The construction sector which has been in crisis since the onset of the global financial crisis in 2008 following a pre-crisis boom, was surprisingly the sector with the key contribution to the 2015 growth, apparently fueled by public investments and some energy-related investments from the Trans Adriatic Pipeline and a major hydropower plant in southeastern Albania.
The key services and trade sectors, accounting for 60 percent of the country’s GDP, registered lower confidence drops of 1 percent and 4 percent respectively on poor demand.
The industry sector, which has been hit by a sharp cut in international oil and base metal prices, recorded a 3 percent confidence decline in the year’s first quarter.
The industry sector continued having a positive contribution in 2015 only thanks to the garment and footwear industry, the country’s top exporting industry and one of the key private sector employers.
Consumers also became more pessimistic in the first quarter of the year when their confidence was down by 2.5 percentage points on worsening big purchases, the expected household financial situation and the income/spending balance.
Expectations for the second quarter of the year remain mixed as the construction sector remains pessimistic, while the services and trade sectors and consumers expect only a modest recovery.
The survey comes at a time when the Albanian economy continues struggling with sluggish exports and lending and an almost deflationary situation after consumer prices grew by only 0.2 and 0.3 percent in February-March 2016, considerably below the central bank’s target of 3 percent which is estimated to have a positive impact on the country’s economic growth.
The Albanian government expects the country’s economy to grow by 3.4 percent in 2016, following growth rates of 1 to 3 percent since the onset of the global crisis in 2009 and a pre-crisis decade of 6 percent. However, several international financial institutions, including the World Bank, have already revised down Albania’s growth prospects to 3.2 percent on declining exports due to a sharp decline in commodity prices. The country’s central bank has also revised the 2016 growth outlook to 3 to 3.2 percent.
A decline in commodity prices affecting exports, sluggish domestic consumption, public debt at around 72 percent of the GDP, non-performing loans at about 20 percent, exports and lending struggling to recover to positive growth rates and an ongoing decline in migrant remittances hint Albania will face another tough year in 2016.
