TIRANA, July 15 – A review in the methodology of the GDP calculation saved the Albanian economy in the first quarter of this year when the GDP grew by a surprise 2.8 percent at a time when severe floods, lower exports and sluggish domestic consumption indicated the economy had slowed down compared to January-March 2014 when it grew by 1.64 percent.
State statistical institute, INSTAT, said it had applied a new methodology which takes into account both the traditional output method and the new expenditure method, providing figures in real GDP compared to the previous gross value added by main economic activities.
INSTAT said the GDP in the first quarter of 2015 grew by 2.82 percent year-on-year and was up by 0.32 compared to the final quarter of 2014.
“Energy and water” had the largest 0.96 percentage point contribution to the GDP growth, followed by “public administration, education and health” with 0.39 percent, agriculture with 0.39 percent and financial and insurance activities with 0.35 percent.
Lower imports of electricity and the nationwide campaign to collect accumulated unpaid bills and cut off illegal connections to the grid are estimated to have had a positive impact on the “energy and water” group.
Professional activities and administrative services contributed by 0.31 while the long-ailing construction sector had a 0.25 percent contribution. “Trade hotels, restaurants and transport,” which represent the key services sector accounting for about 60 percent of the GDP, had a minor 0.18 percent contribution to the GDP growth in the first quarter of the year.
Household and government spending dropped by 1.22 percent and 0.01 percent respectively in the first quarter of this year, INSTAT said.
The agriculture sector, which employs around half of the Albanian population but provides only 20 percent of the GDP, grew by only 1.85 percent in the first quarter of this year affected by severe floods last February. Floods that hit southern Albania in February are estimated to have affected the livelihoods of 42,000 people and caused direct damage of some Euro 10 million.
INSTAT had recently reported a slowdown in retail sales and the turnover index in the first quarter of this year when the southern part of the country was severely hit by floods while exports suffered a slight decline affected by lower international oil prices.
Domestic consumption, indirectly measured by the value added tax, the most important tax levied at a fixed 20 percent rate on almost every product and service, suffered an 11 percent in the year’s first quarter.
Meanwhile, private investments, measured by imports of “machinery, equipment and spare parts” rose by 22 percent to around 25.4 billion lek (€178 mln) in the first quarter of this year, leading the import list.
Data published by the country’s central bank in its quarterly current account report shows foreign direct investment rose to 256 million euros in the first quarter of 2015, up from 172 million euros during the same period last year, registering a sharp 49 percent increase.
Albania’s Economic Sentiment Indicator dropped by 4.6 percentage points in the first quarter of this year, registering a turning point after a recovery in four consecutive quarters, affected by a confidence drop in all sectors of the economy, including industry, construction, services, trade, and deteriorating consumer confidence , according to a central bank survey.
Facing a slowdown in exports due to lower production affected by a slump in international oil prices, the Albanian government and the International Monetary Fund have slightly revised downward Albania’s GDP growth forecast for 2015 to 2.7 percent for 2015, down from an initial 3 percent.
Top trade partner Italy escaping recession and the start of the Trans Adriatic Pipeline construction are expected to have a major impact on the Albanian economy in 2015 after sluggish GDP growth rates of 1 to 2 percent in the past three years. However, the escalating debt crisis in Greece, the country’s second trading partner, top investor and host of more than 500,000 Albanian migrants could have spillover effects for Albania.
Public debt at around 70 percent of the GDP, non-performing loans at around a quarter, lending struggling to remain at positive growth rates and a slowdown in exports are considered key barriers to Albania’s growth.
Revised INSTAT data shows the Albanian economy grew by 2.12 percent in 2014, up from 1.11 percent in 2013, 1.42 percent in 2012, an average of 3 percent in 2010 and 2011 and a pre-crisis decade of 6 percent.
The Albanian government and the IMF and World Bank which are assisting in reforms with lending and expertise, expect the country’s economy to accelerate from 2.1 percent in 2014 to 3 percent in 2015, 4 percent in 2016 and 4.5 percent in 2016 and 2017.
In its 2014 progress report on Albania, the European Commission said state statistical institute, INSTAT, needs to increase independence and professional expertise. “There has been progress towards alignment with EU standards in the field of statistics. Further substantial efforts are needed, in particular in the field of national accounts. The Albanian civil registration system and the methodology used for the labour force survey need to be improved. INSTAT’s independence and professional expertise need to be ensured,” said the Commission.
