By Ervin Lisaku
TIRANA, Jan. 14 – After sluggish performance in the first half of last year, the Albanian economy registered a significant recovery in the third quarter of 2014, but the 2 percent growth target still seems at risk.
Data published by state statistical institute, INSTAT, shows the Albanian economy accelerated to 3.3 percent after slightly contracting in the second quarter of the year and growing by around 1.4 percent in the year’s first quarter.
The expected recovery in the third quarter of the year, which is the peak of the tourist season, was led by services and the long-ailing construction sector. The transport sector, which has been contracting since the first quarter of 2012, continued registering negative double-digit growth rates.
The moderate recovery in the third quarter of 2014 is also a result of the low base effect in the third quarter of 2013 during the country’s transition to a new government when the economy contracted by 2 percent.
The 3.3 growth in the third quarter of 2014 and the revise downward of the contraction in the second quarter of the year means the Albanian economy has grown by 1.35 percent in the first three quarters, but needs stronger growth of around 4.7 percent in the final quarter of the year in order to achieve its 2 percent target growth.
INSTAT revised downward the contraction in the second quarter to 0.37 percent, down from an initial 0.6 percent and also reduced growth in the first quarter of the year to 1.42 percent, down from 1.73 percent.
INSTAT data shows ‘trade hotels and restaurants’ had a positive contribution of 1.71 percentage points to the GDP in the third quarter of the year followed by other services with 1.1 percent, construction with 0.81 percent, industry with 0.37 percent and agriculture with 0.24 percentage points. Transport, which was the only sector to contract, had a negative contribution of 1.05 percentage points.
Trade, hotels and restaurants registered the strongest annual growth of around 10.4 percent in the third quarter of the year, followed by the long-ailing construction sector which grew by 7.53 percent, post and communication with 5.4 percent, other services with 3.76 percent, industry with 2.45 percent and agriculture with 1.2 percent. The transport sector which has been shrinking since the first quarter of 2012 registered another double digit decline of around 24 percent.
In the ‘other services’ group, education, the financial and real estate sector, as well as legal, engineering and consultancy services posted negative growth rates.
Share to GDP
INSTAT data shows the services sector represented by ‘trade, hotels and restaurants,’ transport, post and communication and ‘other services’ which include financial activities, real estate, public administration, education and health accounted for 50.3 percent of the GDP at the end of 2013, down from 51.6 percent in 2012 and around 57 percent in 2007 just before the onset of the global financial crisis.
Second comes agriculture, forestry and fishing which despite employing around half of the country’s population provided 22.6 percent of the GDP in 2013, up from 21.8 percent in 2012 and 19.4 percent in the 2008-2009 period. Industry has considerably increased its share to the GDP in the past few crisis years mainly as a result of successful oil and mining concessions but also the traditional garment and footwear products. Industry accounted for 15.1 percent of the GDP in 2013, up from 14.4 percent in 2012 and 11.4 percent in 2008. Within this group oil extraction and mining provided 6.1 percent of the GDP in 2013, up from only around 1 percent in 2007 mainly as a result of a sharp increase in oil production by Canada-based Bankers Petroleum.
The long-ailing construction sector, once a key driver of the economy, has seen its GDP share drop from 18 percent in 2008 to 12 percent in 2013.
The Albanian economy is estimate to have grown by 1.45 percent in 2013, down from 1 percent in 2012 and an average of 3.5 percent in 2009-2011 compared to a pre-crisis decade of 6 percent.
Political reactions
The GDP publication by INSTAT shows the Albanian economy registered satisfactory growth in the third quarter of 2014 and is heading toward the annual target of 2 percent, says deputy Economy Minister Ervin Mete.
“The improvement of the business climate, the ease of procedures, a growing trend for private investments and the strengthening of the key sectors of the economy show the country’s economy is back to consolidated growth,” he added.
The deputy minister dedicated growth to reforms in the energy sector, public finances, the payment of government arrears, and support packages to the manufacturing and agriculture sectors and law enforcement.
Former Finance Minister Ridvan Bode, also an opposition Democratic Party MP, describes INSTAT’s figures on the GDP growth as fabricated.
Blaming government for the situation, Bode who was Albania’s finance minister from 2005 to 2013 says “the increase in taxes, the review of concessions, and the stance toward foreign investors who in 2014 showed they are not interested in investing in Albania show the government is the problem of the current economic situation.”
The opposition Democratic Party says 2015 will be more difficult for Albanian households and businesses because of higher electricity prices, and an increase in withholding tax on non-wage income, and the corporate income tax which since 2014 has been raised to 15 percent.
