TIRANA, Oct. 11 – The Albanian economy continues growing at low rates mainly because of the ongoing crisis in the construction sector and lower foreign direct investment and immigrant remittances triggered by the global financial crisis.
The latest data published by the Institute of Statistics (INSTAT) show the Albania economy grew by 3.3 percent year-on-year in the second quarter of this year and 2.4 percent compared to the first quarter of 2010.
Industry, trade and transport had the biggest impact on the second quarter performance growing by 31.8%, 12.7% and 8%, respectively compared to the same period last year.
Meanwhile, construction and telecommunications, two of the country’s most vital sectors in previous year, continued suffering, registering negative growth rates.
INSTAT year-on-year data show construction activity fell by 29 percent while telecommunication market shrank by 2.6 percent in the second quarter of 2010.
Compared to the first quarter of 2010, industry, trade and transport registered growth rates of 11.2 percent, 3.3 percent and 2.7 percent, respectively.
Construction
The construction industry dropped by 3.3 percent compared to the first quarter of 2010.
This sector continued its poor performance even in the first three months of this year, dropping by 21.1 percent year-on-year and 4.3 compared to the last quarter of 2009.
Construction was also the hardest hit in the last quarter of 2009, recording a 14.4 per cent drop compared with same period of 2008 and an 11.8 per cent decrease from the third quarter of 2009.
Construction has been one of the most dynamic sectors in the country contributing to more than 10 percent of the GDP in the past years and employing 18 percent of people working in the private sector.
Meanwhile, construction costs continue increasing despite the crisis this important sector to the Albanian economy has been suffering since the last quarter of 2009.
The construction cost index rose 0.2 percent year-on-year during the second quarter of 2010 and 0.2 percent compared to the previous quarter, according to INSTAT.
Central bank surveys show the construction confidence index increased by 3.7 percent during the second quarter but remained 8.9 percentage points below its long-term average. Companies said informal economy and lack of construction permits were the biggest obstacles to their normal activity.
The capacity utilization rate in this sector remained 69 percent, 3.3 percent more than the first quarter and 0.8 percent above its historical average.
Construction companies expect negative developments for the third quarter despite the increase in demand. Production prices are also expected to increase.
Agriculture
The agriculture sector, employing the majority of people in rural areas where all people are considered self-employed because of possessing land, grew by 4.8 percent year-on-year and 1 percent compared to the first quarter of this year.
Under recently approved budget cuts, capital expenditure on agriculture has been halved to 1.4 billion lek, compared to 3 billion lek in the previously approved budget, according to the Finance Ministry.
The irrigation and drainage infrastructure is the most affected with total capital expenditure cut to only 647 million lek, down from 2 billion lek previously.
Expenditure on food safety and consumer protection has also been reduced to 197 million lek, down from 265 million lek.
With 58 percent of total labour force and 19 percent of GDP, the agricultural sector continues to be one of the most important sectors of the Albanian economy.
More than 50 percent of the Albanian population lives in rural areas, where agriculture is the main activity.
