TIRANA, June 13 – Albania’s foreign direct investment and tourism income only modestly increased in the first quarter of this year when foreign companies operating in the country sharply increased transfer of profits, according to the central bank.
Data from the quarterly balance of payments also shows migrant remittances, which have been on a constant downward trend during the past decade, remained unchanged in the first quarter of this year, while Albanians slightly increased their spending in trips abroad.
The increase in exports in the first quarter of this year mainly due to a recovery in commodity prices also had a positive impact on narrowing the gap in the country’s current account. A key indicator of a country’s economic health, the current account deficit measuring the flow of goods, services and investment into and out of the country, dropped to €179 million in the first quarter of this year, down from €224 mln in the first quarter of 2016 when oil prices hit a 12-year low, considerable affecting Albania’s poorly diversified exports.
Foreign direct investment continued relying on some old major projects such as the Trans Adriatic Pipeline and the Devoll hydropower project by Norway’s Statkraft even in the first quarter of this year.
Central bank data shows FDI rose by an annual 7.6 percent in January-March 2017 mainly due to the TAP project bringing Caspian gas to Europe entering its pipeline construction stage.
FDI hit a historic high of about Euro 1 billion in 2016 but investment in oil and mining remained sluggish as commodity prices only slightly picked up from the mid-2014 slump, delaying scheduled investment and strongly affecting the country’s poorly diversified exports mainly relying on ‘garment and footwear’ and ‘oil and minerals.’
Lack of newly contracted major FDI projects in the past few years has sparked concern over the future of FDI in the country in the post 2020 when TAP and Devoll hydropower are completed. However, the implementation of a long-awaited justice reform increasing investor confidence in the country’s highly perceived corrupt judiciary and a revise downward in the tax burden, currently one of the region’s highest, could give a real boost to FDI and know-how especially in non-energy related sectors creating more jobs.
Travel income during the first quarter of this year also rose by 6.3 percent to about €300 million as the some 602,000 foreign tourists were reported to have entered the country.
Albania’s emerging travel and tourism industry registered a strong recovery last year when a record 4.7 million foreign tourists were reported to have visited the country, bringing more than €1.5 billion in travel income, according to central bank and INSTAT data.
The industry which directly employs 85,000 people is emerging as a key driver of the Albanian economy already accounting for about 9 percent of the country’s GDP and with optimistic mid and long-term growth prospects as the country’s attracts more and more tourists.
Meanwhile, Albanians increased their spending in trips abroad to €226 million in the first quarter of this year when about 1 million Albanians travelled abroad.
Albanians only slightly increased their spending in trips abroad in 2016 when they spent about €1.1 billion, mainly in trips to neighbouring Italy and Greece, where about 1 million Albanians live and work, but also holidaying in other destinations such as Turkey which despite security concerns continues remaining a favourite destination for summer vacations among Albanians.
On a downward trend since the outbreak of the global financial crisis in 2008, migrant remittances remained unchanged at about €136 mln in the first quarter of this year, still playing an important role for thousands of poor households in the country.
Fuelled by a recovery in Italy and Greece, Albania’s main trading partners and migrant hosts, remittances slightly recovered for the third year in a row in 2016 when they climbed to €616 million, but remained about a third below their peak level of €952 million in 2007 just before the onset of the global financial crisis, according to the country’s central bank.
Foreign companies operating in Albania transferred about €71 mln in profits in the first quarter of this year, double compared to the same period last year, raising concerns about lack of reinvestment.
Since the onset of the global financial crisis, foreign companies operating in Albania have considerably increased the transfer of profits to their parent companies rather than reinvesting them in Albania.
The transfer of profits slightly dropped to about €203 million in 2016, but remained at almost the same annual outflow for the past three years.
The transfer of profits hit a record high of €401 million in 2009 at the onset of the global financial crisis compared to a pre-crisis decade of €19 million to €57 million annually, according to the Bank of Albania.
FDI
Q1 2017 = €168 mln
Q1 2016 = €156 mln
Travel income
Q1 2017 = €301 mln
Q1 2016 = €283 mln
Travel spending
Q1 2017 = €226 mln
Q1 2016 = €216 mln
Migrant remittances
Q1 2017 = €136 mln
Q1 2016 = €136 mln
Transfer of profits
Q1 2017 = €71 mln
Q1 2016 = €35 mln
Source: Bank of Albania