TIRANA, Feb. 29 – Albania’s exports made a poor start this year when they suffered a new decline fueled by an ongoing decline in international oil and base metal prices. Data published by state statistical institute, INSTAT, show Albania’s exports dropped by an annual 8 percent to 16.4 billion lek (€118 mln) in January 2016 affected by a sharp 44 percent drop in sales of “minerals, fuel and electricity,” the country’s second largest exports in the past few years within which oil holds the lion’s share.
Albania’s exports of “minerals, fuel and electricity” dropped to about 2 billion lek (€14.8 million) in Jan. 2015, down from 3.6 billion lek (€26.3 mln) a year ago and a record 6.1 billion lek (€44.4 mln) in Jan. 2014 when oil prices were at their peak level before plunging on a downward trend in mid-2014 that has currently taken them to a 12-year low.
Both oil and base metal prices at record lows have considerably affected domestic production and government revenue, also leaving hundreds of oil and mining workers jobless.
The garment and footwear industry, the country’s top exporter, slightly compensated for the sharp decline in oil and base metal exports, registering a 15 percent increase in Jan. 2016 fueled by growing demand from Italy, the country’s top trading partner and the destination of the overwhelming majority of 90 percent of garment and footwear products. The industry, locally known as faà§on, is one of the country’s top employers with an estimated 100,000 people.
Exports of construction materials and metals also dropped by 64 percent last January, unveiling the ongoing crisis in the construction and mining industries.
Meanwhile, Albania’s imports slightly dropped by 1.5 percent to 34.7 billion lek (€251 mln) last January, but imports of “machinery, equipment and spare, parts,” an indicator also measuring private investment, grew by 15 percent to 8 billion lek (€58 million).
The country’s trade gap slightly rose to 18 billion lek (€132.7 mln) in Jan. 2016 with exports covering only 47 percent of imports.
The poor diversification of Albania’s exports heavily relying on oil and base metals whose prices are currently at a record low is expected to have another negative impact on the country’s exports which dropped by 5 percent in 2015, returning to negative growth rates after a contraction in 2009 soon after the onset of the global financial crisis.
Albania’s exports heavily rely on garment and footwear manufacturing as well as oil and base metals whose share in the country’s exports dropped to 63 percent in 2015, down from 67 percent in 2014 when oil prices embarked on a downward trend.
In a recent working paper, the IMF warns emerging countries should diversify their production and exports base in order to have more alternative sources of revenues, allowing them to deal with the volatility of commodity exports related revenues.
“Lack of diversification may increase exposure to adverse external shocks and vulnerability to macroeconomic instability, while a diversified export base may allow countries to better handle declines in commodity related revenues with alternative sources,” says the IMF.
In its latest Commodity Market Outlook report, the World Bank warns all main commodity price indices are projected to further decline in 2016 due to persistently elevated supplies and, in the case of industrial commodities, weak growth prospects in emerging market economies.
Energy prices are expected to fall 25 percent from 2015, with oil prices projected to average $37/bbl in 2016. For 2015 as a whole, energy prices plunged by 45 percent from the previous year, while non-energy commodity prices declined by 15 percent.
Downside price risks include a further growth slowdown in China and larger than-expected production associated with cost reductions and exchange rate depreciation in producing countries, says the World Bank.
