EBRD reiterated that Albania remains seriously endangered by the Greek crisis “as the majority of remittances into Albania come from migrants in Greece, many of whom work temporarily in seasonal jobs.”
TIRANA, May 23 – As the financial crisis in neighboring Greece escalates, the EBRD, one of Albania’s biggest financiers, warns the country is particularly vulnerable to a serious Greek downturn. In a report called “Regional economic prospects in EBRD countries of operations” published in May 2011, the EBRD reiterates that Albania remains seriously endangered by the Greek crisis “as the majority of remittances into Albania come from migrants in Greece, many of whom work temporarily in seasonal jobs.” However, the EBRD report also says that Albania was the Western Balkan country with the highest growth rate of 3.8 percent in 2010. “The key macroeconomic risk in Albania stems from potential spillover effects from Greek crisis, mostly in the form of falling investment, lower remittances, higher costs for local subsidiaries of Greek banks and reduced trade flows,” said EBRD in an earlier 2010 Transition Report. Experts had previously predicted that Albania would be the hardest hit country from the crisis because of the size of Greek investments and the large Albanian migrant community in Greece– whose remittances are a major source of revenue for many Albanian families. Around 46 percent of immigrants sending remittances are reported to living in neighboring Greece, compared to 41 percent in Italy, according to a central bank survey. Albania has more than 600,000 immigrants in Greece, who make up 10 percent of Greece’s total workforce. Greece is currently the top foreign investor and the second largest trade partner after Italy since the early 90s. Greek businesses are present in almost every sector of the Albanian economy, including strategic ones such as telecommunications, banking, energy, industry, construction, trade and tourism; which significantly contribute to the country’s economic growth. The severe financial crisis Greece has been experiencing since 2009 has also affected thousands of Albanian immigrants there, as jobs in the construction and agriculture sectors have been significantly reduced. Remittances have also registered a sharp drop. According to a survey carried out by bank of Albania, the amount of remittances immigrants sent to their families in Albania registered a considerable drop in 2009, reflecting the effects of the financial crisis in their host countries, mainly Greece and Italy, where more than one million Albanian immigrants live and work. The average amount of quarterly remittances a household received in 2009 dropped to 270 Euros, down from 289 Euros in 2008, according to findings of a survey carried out by the Bank of Albania and the country’s Institute of Statistics (INSTAT). Remittances are a major source of income for a considerable number of Albanian families in urban and rural areas. Top EU officials urged Greece this week to sell more state holdings to reduce its debt crisis and show it is serious about regaining market trust. Greece suffered another bond downgrade last week from the Fitch ratings agency, and Prime Minister George Papandreou later conceded plans to return to bond markets next year may not be achievable. The EBRD report also reveals Albania’s high public debt level, which at 59.7 percent of GDP at the end of 2010 remains the highest among the seven Southeast European countries covered in the report. Albania’s public debt is the second highest in the region after Greece, posing great risk to the country’s macroeconomic stability. This is confirmed by statistics published by Open Data Albania which says that Albania’s public debt, which in 2009 was worth 680 billion lek, at 59.5 percent of the GDP is better only compared to neighboring Greece’s 115 percent. The public debt levels for Macedonia, Bosnia and Herzegovina, Croatia, Serbia, Montenegro and Turkey vary from 23 to 45 percent of the GDP. EBRD expects the Albanian GDP growth rate to drop to 3 percent this year, down from 3.9 percent in 2010. Meanwhile, the annual inflation rate is expected to reach 4.7 percent, exceeding the Bank of Albania target by 0.7 percent. EBRD is one of the most active private-sector financiers in Albania with a recent focus on small production enterprises, development of natural resources, as well as improvement of the infrastructure. To date EBRD has invested 120 million Euros for the modernization of transport infrastructure in Albania. Overall it has committed around 550 million Euros in various sectors of the country’s economy, mobilizing additional investments of close to 1 billion Euros.
