TIRANA, July 17 – U.K.-based BMI Research, a unit of Fitch, has slightly revised upward Albania’s 2017 GDP growth forecast, but expects the 2018 growth to slow down.
In its latest country risk report, the Fitch unit, revised upward Albania’s 2017 forecast by 0.3 percent to 3.6 percent, but left unchanged the 2018 outlook at 3.3 percent.
The 2017 revision is mainly related to strongly recovering exports as commodity prices have picked up with a positive impact on the country’s poorly diversified exports strongly relying on oil and mineral sales, the country’s second most important exports.
The Fitch unit says recovering domestic demand and the construction sector are expected to be the main drivers of the country’s growth in the next couple of years.
Once the key driver of the Albanian economy in the pre-crisis years, the until recently long-ailing construction sector is emerging as a key contributor to the country’s growth, mainly thanks to some major energy-related projects such as the Trans Adriatic Pipeline bringing Caspian gas to Europe and the Devoll hydropower project by Norway’s Statkraft, both of which in their peak construction stage.
“We have made upward revisions to our 2017 real GDP growth forecast for Albania on an improved outlook for the external sector. With that said, the improvement will not prove long-lived and we believe that domestic demand will be the main driver of growth over the next two years, with the construction sector a particularly bright spot,” says BMI Research, the research arm of the Fitch Group, one of the global leaders in financial information services.
The BMI Research forecasts are considerably lower compared to the Albanian government’s more optimistic scenario of a 3.8 percent GDP growth for 2017 and a pickup to 4.1 percent in 2018.
The Albanian economy has been growing by an average of 1 to 3 percent annually since 2009 following a pre-crisis decade of 6 percent annually, the growth rate estimated to bring welfare to the EU aspirant Balkan economy.
In another Albania Oil and Gas report, BMI Research says new investors and an improved price environment will see Albania’s oil and gas production stabilize by mid-2017 after a downward trend since mid-2014 following a slump in commodity prices severely affecting domestic oil production, investment and exports.
“The conclusion of a swathe of M&A activity in the Albanian oil sector will create more stability in production from 2017. Stronger oil prices and positive results of Shell’s Shpirag-3 well will be key to encouraging new investment into exploration and production. The completion of the TAP pipeline from 2020, presents the opportunity for the start of increased gas consumption within the country,” says BMI Research.
Last year, Canada-based Bankers Petroleum, the country’s biggest oil producer, was fully acquired by a Chinese consortium led by China Everbright Limited producer for C$575 million (€392 mln) after more than a decade of operations in Albania.
Earlier in 2016, U.S.-based TransAtlantic Petroleum announced the sale of its loss-making Albanian unit to a company named GBC Oil, but retained its interest in the southern Albania Delvina gas project.
The Fitch unit expects the drop in production of crude and natural gas and other liquids to slow down to 17,600 barrels of oil per day (bopd) in 2017, from 18,100 bopd in 2016 and a record high of 27,500 bopd in 2014 when oil prices were at their peak levels.
International oil prices are expected to considerably recover to $57 a barrel in 2017, up from a record low of $45 a barrel in 2016, but yet almost half of the peak level of more than $110 in mid-2014 just before the slump that took them to a 12-year low in early 2016, halting new investments and significantly affecting Albania’s poorly diversified exports and underperforming government revenue. Mid-term prospects are not very optimistic as Brent oil prices are expected to fluctuate between $60 to $70 a barrel until 2021, says BMI Research.
