TIRANA, April 19 – The Albanian economy is expected to benefit from a slight recovery in the euro area in 2016 especially top trading partner Italy although uncertainties in neighboring Greece continue.
In its latest World Economic Outlook, the IMF expects Italy, the country’s top trading partner accounting for 50 percent of total exports and 30 percent of imports, to accelerate to 1 percent in 2016 after a 0.8 percent GDP growth in 2015 when it returned to positive growth after three years of contraction.
Prospects for the Albanian economy and some 500,000 Albanian migrants who live and work there are more optimistic as Italy’s unemployment rate is slightly expected to drop to 11.4 percent and remittances could receive a boost.
Italy is a key destination of for the Albanian garment and footwear industry employing some 100,000 people and mainly relying on imported raw material and cheap labour costs. About 90 percent of footwear and garment products manufactured in Albania, which are the country’s main exports, go to Italy.
Meanwhile, neighboring Greece, the country’s traditional second largest partner and top foreign investor, is expected to slightly contract for the second year in a row after escaping its six-year recession in 2014. The IMF expects the Greek economy to contract by 0.6 percent in 2016 but register growth rates of 2 to 3 percent from 2017 to 2020. Neighboring Greece, whose economy contracted by 26 percent from 2008 to 2013, is also the host of some 500,000 Albanian migrants whose remittances have suffered a sharp decline. Greece’s position as Albania’s second largest trading partner has sharply deteriorated, making the neighboring country the sixth most important destination of Albanian exports.
The IMF expects Greece’s unemployment rate to remain almost unchanged at 25 percent before embarking on a downward trend from 2017.
“For 2016 the prospects of the Greek economy are significantly improved and closely linked to the successful conclusion of the 1st review of the financial assistance agreement. The latter is expected to boost confidence and facilitate the return of deposits in the Greek banking system improving its stability and accelerating the abolishment of the currently active capital controls,” says the IMF.
The International Monetary Fund expects the Albanian economy to grow by 3.4 percent in 2016 despite low oil prices hampering the country’s exports.
“The Albanian authorities have intensified their reform agenda in order to ensure a sustainable economic growth trajectory. Despite continued growth, under-utilized capacities are still prevailing in labor and capital markets, resulting in high unemployment and subdued inflationary pressures,” said Pier Carlo Padoan, the Italian Economy Minister speaking on behalf of Albania at an IMF meeting in Washington.
London-based EBRD has earlier warned “Albania’s strong trade, investment and remittance ties to Greece and Italy, both of which face continued economic gloom, are likely to continue to constrain growth and the high level of public debt will limit the room for fiscal manoeuvre.”
