Albania’s strong trade, investment and remittance ties to Greece and Italy are likely to continue to hold back growth in the coming year, while public debt is close to the statutory limit of 60 per cent of GDP, limiting the room for fiscal manoeuvre, says the EBRD.
By Ervin Lisaku
TIRANA, May 21 – Citing spillover impacts from the crisis in Greece and Italy, Albania’s top trade partners, and public debt close to the legal ceiling of 60 percent of the GDP, London-based EBRD predicts a gloomy 2012 for Albania. In its new Regional Economic Prospects report, the European Bank for Reconstruction and Development kept Albania GDP growth forecast for 2012 and 2013 unchanged at 1.2 and 1.8 percent respectively, which is three times below the Albanian government’s target.
“Albania continued to grow faster than other countries in the region in 2011 but it experienced a slowdown in economic activity in the second half of 2011 and early 2012 largely due to the weak performance of its key EU markets, Greece and Italy. Albania’s strong trade, investment and remittance ties to these countries are likely to continue to hold back growth in the coming year, while public debt is close to the statutory limit of 60 per cent of GDP, limiting the room for fiscal manoeuvre,” says the EBRD.
For the first quarter of 2012, the EBRD estimates the Albanian economy has managed to grow by only 0.4 percent.
At 1.2 percent for 2012, Albania’s growth would be the second highest among seven South-East Europe countries, lower only compared to Macedonia’s 1.3 percent. However, at 1.8 percent for 2013, Albania’s GDP growth would be among the lowest in the region, better only compared to Bosnia’s 0.6 percent and Montenegro’s 1.6 percent. Serbia, Romania, Macedonia and Bulgaria’s growth in 2013 will range from 2.5 to 2.6 percent, says the EBRD.
The EBRD forecast remains among the most pessimistic for Albania, better only compared to IMF’s 0.5 percent for 2012. The World Bank has forecast a 2 percent growth rate for 2012 while the Vienna Institute expects the Albanian economy to grow by 2.2 percent.
The grim picture of the Albanian economy is also confirmed by early 2012 data which show consumption, exports and investments, the key pillars of the economic growth failed to recover and might force government to make mid-year budget cuts for the third year in a row.
The Albanian economy grew by 3.1 percent in 2011, remaining at the same moderate growth rates for the third year in a row, according to INSTAT data. Despite having preserved an annual 3 percent growth rate from 2009 to 2011, the Albanian economy lags behind almost every EU aspirant, including Bosnia Herzegovina in GDP per capita and purchasing power indicators.
A recent EBRD survey has shown the global economic crisis has affected a majority of households in Albania. Around 60 per cent of respondents say that their households have been significantly affected, compared to a transition region average of about 50 per cent. This is despite the fact that Albania was one of the few countries to maintain positive growth during the crisis, says the report which surveyed almost 39,000 households in 34 countries.
The latest EBRD report issued this month says South-eastern Europe is expected to grow at an even lower rate of 1.0 per cent in 2012, picking up to about 2.4 per cent a year later. While no SEE country is expected to re-enter recession, most of them will see anaemic growth, reflecting a big drop in investment in recent years and weak levels of confidence, in part as a reflection of their links to crisis-hit Greece.
“The euro area crisis will continue to negatively impact those economies in the transition region that are the most intertwined with those of the eurozone. Although recent data suggests that capital outflows from the region may be levelling off, negative real credit growth and declining exports will continue to impede expansion,” says the report.
