TIRANA, September 14 – Foreign direct investment (FDI) and remittances, two of the country’s main sources of economic growth, continued dropping even in the second quarter of this year.
Foreign direct investment registered a considerable drop in the second quarter of this year dropping to 171 million, down from 293 million euros during the same period last year, according to central bank statistics.
However, data show FDI increased by 14 million euros compared with the first quarter of this year. FDI during the first half of this year totaled 325 million euros, down from 413 million in the first half of 2009.
Foreign direct investment registered a 25.6 percent growth in the first quarter of 2010, after a sharp drop in 2009. FDI in the first three months of this year was mainly used to finance investments in the telecommunication and oil sectors. FDI reached 154 million euros in the January-March period, increasing by 34 million euros year-on-year, according to central bank data.
Last year, FDI registered a 7 percent growth compared to 2008, reaching 664 million euros. However, an important part of these investments came from the sale of public assets such as the minority stake at mobile operator AMC and the privatization of the Distribution System Operator.
The FDI is considered as the most important factor for the development of the country because of the capital, technology and new experience it brings.
The central bank suggests establishing competitive advantages as a sustainable source of foreign financing. Comparative analysis shows Albania has one of the lowest rates of attracting FDI in region, currently at less than 10 percent of the GDP.
The privatization wave government has launched on the remaining public assets is expected to bring between 100 to 150 million euros by 2011 and is seen as an important process to increase government revenues and FDI.
Remittances
Albania immigrants working abroad, mainly those in Greece and Italy, continue bringing less money at home because of the ongoing crisis in their host countries which has cut a considerable number of jobs.
Immigrant remittances during the second quarter of this year registered 222 million euros, up from 170 million in the first quarter of this year, but down 19 million euros year-on-year.
In total, remittances during the first half of this year dropped to 392 million, down from 424 million during the same period last year.
Remittances fell by 6.7 percent during the first quarter of 2010 compared to the same period last year mainly as a result of the crisis in Greece and Italy where more than one million Albanian immigrants live and work. Immigrant remittances in the first quarter of this year registered 170 million euros, 13 million euros less than the same period last year.
Albania is particularly vulnerable to a serious Greek downturn, as the majority of remittances into Albania come from migrants in Greece, many of whom work temporarily in seasonal jobs, says EBRD in its May 2010 economic outlook report.
“Albania is the one country in this sub-region that managed positive growth in 2009, but growth is likely to decrease in 2010, reflecting the impact of recent floods, a slowdown both in capital inflows and in remittances as well as slower credit growth,” said the EBRD.
The Bank of Albania (BoA) noted in its monetary policy report for the second quarter of 2010 that the drop in immigrant remittances, one of the main sources of foreign financing, and the low rate of foreign direct investment (FDI) need efficient measures to attract foreign capital,.
