TIRANA, Dec. 14 – Albania’s consumption slightly dropped in 2016 while GDP per capita remained unchanged at less than a third of the EU average despite Albania’s growth accelerating to 3.4 percent, unveiling that the recovery triggered by some major energy related projects such as the Trans Adriatic Pipeline had little impact on bridging the huge gap with EU member countries.
In a report published this week, the EU’s statistical office, Eurostat, revised downward Albania’s actual individual consumption (AIC), a measure of households’ material welfare and the GDP per capita, an indicator of economic activity, by 1 to 2 percentage points compared to its mid-year publication, ranking Albania as the worst performing for these two indicators in a 37-country list which includes 28 EU member states, three EFTA members, five EU candidate countries and one potential candidate.
The Eurostat report shows Albania’s actual individual consumption slightly dropped to 37 percent of the EU average in 2016, down 1 percent compared to 2015 while the GDP per capita expressed in purchasing power standards (PPS), an artificial currency unit that eliminates price level differences between countries, remained unchanged at 29 percent, more than two-thirds below the EU average.
Among Western Balkans regional EU aspirants, actual individual consumption ranges from 41 percent of the EU average in Bosnia and Herzegovina, 46 percent in Serbia and 56 percent in Montenegro.
Differences in GDP per capita are bigger as the economic activity indicator measured in purchasing power standards ranges from 29 percent of the EU average in Albania, to 32 percent in Bosnia and Herzegovina, 37 percent in Macedonia and Serbia and 45 percent in Montenegro.
No data are available for Kosovo, which apparently has Europe’s worse indicators.
Among EU members, Bulgaria and Romania, who joined the EU in 2007, have the lowest consumption and GDP per capita indicators at about half of the EU average.
An earlier Eurostat report showed Albania’s price levels for consumer goods and services were at 49 percent of the EU average in 2016, Europe’s second lowest.
When compared to disposable income, price levels, especially for food and non-alcoholic beverages at 72 percent of the EU average, are too high for the average Albanian. The situation is a result of the high level of imports and VAT being applied at an undifferentiated 20 percent rate even on basic food products.
“Food and non-alcoholic beverages” takes the majority 44.3 percent of households budgets, a survey by Albania’s state statistical institute, INSTAT, has shown.
Albania’s GDP of about Euro 11 billion is lower only compared to that of Serbia and Bosnia and Herzegovina among the six EU aspirant Western Balkans countries.
Catching up with the EU average
Albania will need 35 years to catch with the EU average income if it continues growing under the current 4 percent rate and 20 years if growth accelerates to an annual 5 percent, World Bank officials said this week in Tirana.
The Albanian government expects the country’s economy to recover to 4 percent in 2017 and maintain the same pace for the next few years, but international financial institutions predict the Albanian economy will slow down on lower foreign investment starting 2018 when two major energy-related projects such as TAP and the Devoll hydropower plants complete and no key projects replace them.
A recent World Bank report has shown catching up with the average EU income could take EU aspirant Western Balkan economies about six decades unless current sluggish GDP growth doubles to 5 or 6 percent.
Growth in the six EU aspirant Western Balkan economies has currently picked up to about 3 percent at a time when the GDP in the EU member states has also recovered to 2 percent.
GDP per capita in purchasing power parity among Western Balkan economies ranges from 10,000 international dollars in Kosovo to about $12,000 in Albania and Bosnia and Herzegovina, about $15,000 in Serbia and Macedonia and $16,800 in Montenegro, according to 2016 World Bank data.
Meanwhile, the GDP converted in international dollars using the purchasing power parity rates is currently three-times higher in the European Union at an average of about $40,000, but ranges from about $19,000 in Bulgaria to about $106,000 in Luxembourg.
“It is important to note that at current growth rates, it would take about six decades for the average per capita Western Balkan income to converge to the average for EU residents. With faster growth of 5 to 6 percent, convergence could be achieved in just two decades. That will require a bold and sustained implementation of structural reforms and steady progress in EU accession processes,” says the World Bank.
