TIRANA, Oct. 5 – The Albanian economy registered an annual growth rate of 2.53 percent in the second quarter of 2015 fuelled a recovery in the long-ailing construction sector and a boost in the domestic hydro-dependant electricity generation, according to a report issued by INSTAT, the state statistical institute.
However, household final consumption expenditure measuring consumer spending was down by 3.16 percent year-on-year in the second quarter of 2014, declining for the second quarter in a row.
The long-ailing construction sector, which has been in crisis since the onset of the global financial crisis in 2008, surprisingly had the major 1.96 percentage point contribution in the second quarter of 2015 when Albania held local elections.
The construction sector, once the main driver of the Albanian economy, grew by 24.5 percent year-on-year in the second quarter of 2015 fuelled by public investments and private investments in the energy sector.
Second came “industry, energy and water” with a 0.72 percentage point contribution to the GDP. INSTAT data shows this group registered an annual 6.3 percent increase with domestic hydro-dependent electricity generation recording a sharp 61 percent increase.
Albania become a net exporter of electricity in the first half of this year on higher hydro-dependent domestic production and a cut in distribution losses following a nationwide campaign to curb electricity thefts and collect accumulated unpaid debts.
INSTAT data shows the “public administration, education and health” had a 0.46 percent contribution to the GDP while “trade, hotels, restaurants and transport” contributed by only 0.15 percentage points.
The contribution to the GDP growth by financial and insurance activities, real estate and information and communication was almost zero.
Surprisingly, the agriculture sector had a negative 0.16 percent contribution to the GDP growth in the second quarter of 2015, apparently affected by the early 2015 floods in southern Albania.
The agriculture sector, which employs around half of the Albanian population and accounts for 20 percent of the GDP, has been one of the most stable sectors in the past crisis years with many local investors considering it as huge opportunity and shifting their investments in this sector.
Economy experts see the construction and energy fuelled growth in the second quarter of the year with skepticism, saying that the current growth does not mean increased welfare for Albanians as consumption has dropped and key sectors such as agriculture have failed to grow.
The Albanian economy grew by 2.65 percent in the first half of this year and is on track to achieve its new revised target of 2.7 percent for 2015.
Albania’s GDP grew by a surprise 2.8 percent in the first quarter of this year at a time when severe floods, lower exports and sluggish domestic consumption indicated the economy had slowed down compared to January-March 2014.
The Albanian government and the IMF have recently revised Albania’s 2015 GDP growth forecast to 2.7 percent down from an initial 3 percent on lower international oil prices affecting exports and spillover impacts from the crisis in neighboring Greece.
Revised INSTAT data shows the Albanian economy grew by 2.17 percent in 2014, up from 1.11 percent in 2013, 1.42 percent in 2012, an average of 3 percent in 2010 and 2011 and a pre-crisis decade of 6 percent.
While the nationwide campaign against informality could further have a negative impact on the current sluggish consumption, the Albanian economy is expected to receive a boost from several major investments.
Prospects for the second half of 2015 seem more optimistic as the major Trans Adriatic Pipeline bringing Caspian gas to Europe has already launched its construction works in its Albania section and Norway’s Statkraft continues the construction of Devoll hydropower plant, the biggest investment in renewably energy in the past three decades in Albania.
However, public debt at around 70 percent of the GDP, non-performing loans at around 20 percent, lending struggling to remain at positive growth rates and a slowdown in exports affected by lower international oil prices are considered key barriers to Albania’s growth.
