TIRANA, March 13 – Trade exchanges with Greece, the second most important trade partner and the top foreign investor in Albania, have been declining in the past four years as the neighbouring country faces its worst recession ever. Bank of Albania data show both exports to Greece and imports have been on a downward trend after reaching their peak level in 2008 just before Greece plunged into recession.
In 2012, Albanian exports to Greece dropped to 67 million euros down from 71 million euros in 2011 and 80 million euros in 2008. Imports from Greece have also been on a constant downward trend dropping from a peak level of 524 million euros in 2008 to 359 million euros in 2012.
Although maintaining its second position for imports, at around 10 percent in 2012 compared to 15 percent in 2008, Greece now ranks Albania’s fifth most important partner for exports after Italy, Spain, Kosovo and Turkey. Exports to Greece in 2012 accounted for only 4.4 percent of the total compared to 8.7 percent in 2008 when Greece was the second most important destination of exports.
The decline of exports to Greece has mostly hit garment and footwear plants in southern Albania which had Greece as their top trade partner.
The Greek economy has shrunk by about a fifth since 2008, partly due to punishing austerity measures demanded in exchange for the bailouts, also affecting Albania with lower exports and remittances from an estimated more than 500,000 migrants.
As Albania’s second top trade partner, top foreign investor and the major source of remittances from an estimated more than half a million Albanian migrants, the impacts of the Greek crisis have considerably affected Albania in the past four years. Albania has had less trade exchanges with Greece, less remittances and foreign direct investment.
Central bank data show Greece remains the key foreign investor in Albania despite being in recession since 2008. Greece’s total foreign investments at the end of 2010 were estimated at 724 million Euros, down from 771 million euros in 2007 before the neighbouring country plunged into recession. Greek businesses are present in almost every sector of the Albanian economy, including strategic ones such as telecommunications, the banking system, energy, industry, construction, trade and tourism, significantly contributing to the country’s economic growth.
Italy ranks second with 401 million Euros of FDI at the end of 2010, according to Bank of Albania data.
A recent study conducted by the Albanian Centre for Competitiveness and International Trade (ACIT) has found that around 180,000 Albanian migrants, or 18 to 22 percent of the total Albanian migrants in Greece, have returned home during the past five years due to the escalating crisis in the neighbouring country.
Data by the country’s Institute of Statistics INSTAT show Albanian exports rose by 8.2 percent in 2012, down from 20 percent in 2011 while imports shrank by 3 percent unveiling the sluggish domestic consumption in a net import country such as Albania.
With an average growth rate of 1.5 percent during the first nine months of 2012, the Albanian economy is reflecting clear signs of crisis from the Euro area partners and developments at home where domestic consumption and exports remains sluggish, and public debt now beyond the previous legal ceiling of 60 percent of the GDP poses a real threat to the country’s macroeconomic stability.
Italy strengthens top position
Trade exchanges with Italy, the traditional top trade partner for Albania have not been affected by the crisis there due to the recession being milder and the economy being one of the biggest in the Eurozone. In 2012, exports to Italy grew to 782 million euros, up from 747 million euros in 2011 and 567 million euros in 2008 just before the onset of the global crisis. Exports to Italy in 2012 accounted for 51 percent of the total compared to around 62 percent in 2008, according to central bank data.
Imports from Italy have also maintained their upward trend during the past five years. In 2012 imports from Italy reached 1.2 billion euros, up from 946 million euros in 2008.
Italy is Albania’s top trade partner with 50 percent of total exports and 30 percent of imports.
More than 80 percent of footwear and garment products manufactured in Albania, which are the country’s main exports, go to Italy. According to Italy’s Confindustria lobby group, some 300 Italian companies operate in Albania, mainly in the footwear and garment manufacturing.
Overwhelmingly dependant on demand from crisis-hit hit top trade partner Italy, the destination of 50 percent of total Albanian exports and 85 percent of garment and footwear products, the fa谮 industry expects 2013 to be more difficult in terms of manufacturing and employment.
“Albania’s strong trade, investment and remittance ties to Greece and Italy, both of which face continued economic gloom, are likely to continue to constrain growth in the coming year, and the high level of public debt, at close to the statutory limit of 60 per cent of GDP, will limit the room for fiscal manoeuvre,” says London-based EBRD.
Exposure to Greece, Italy
Sovereign debt crisis in Greece has shown little impact on the Albanian economy due to the limited role Greece plays in exports and imports and due to the recent flexibility shown by exporting firms to diversify geographically, says the Finance Ministry in its 2012-2014 economic and fiscal programme. Exposure to Greece is small. Foreign direct investment from Greece has been declining in recent years, although total foreign direct investment has increased. Foreign banks with Greek capital operating in Albania are well capitalized but the share of their assets to total banking assets has been declining in recent years. Their portfolio of loans has been reduced and other banks have increased their market share. From this aspect, the effect of the debt crisis in Greece in the real economy is expected to be limited, says the Finance Ministry.
However, the exposure of Albanian economy toward the Italian economy is greater. The share of Albanian exports to Italy is significant bigger at over 50 percent. Until now, financial problems in Italy have had little impact on trade, possibly due to the fact that this country is not always the ultimate destination of Albanian exports. However, a further deterioration in Italy would have a major impact on our economy. Remittances, which are used mainly to finance household consumption, are expected to fall significantly. Influence through foreign direct investment is expected to be smaller, as FDI from Italy decreased and their share of Albania’s GDP is relatively small.
Eurostat, the statistical office of the European Union, expects both Greece and Italy to face another year of recession in 2013.
