IMF says Exports need to be the Growth source for Albania

TIRANA, Nov.22 – IMF mission representative in Albania Ann-Margaret Westin said that Albania needs to find alternative growth catalysts besides remittances and the construction boom. In a speech delivered on Wednesday at the ninth economic forum organized by the Central European Initiative, she urged Albania to boost exports to meet its economic growth targets. At present Albania’s economic growth is fueled by remittances, estimated to constitute 15 percent of GDP, and a boom in the construction sector, as well as by a stable microeconomic environment. Remittances have been the means to finance growth and external current account deficit, according to Westin. Nevertheless, she added that this is not sustainable and that the future requires a stronger focus on Foreign Direct Investments. “Boosting exports will be not only a new financing source but it will also help Albania’s trade balance,” Westin said urging the country to explore the potential of exporting agricultural products. Albania’s trade deficit for the first half of the year rose by 19.2 percent compared to last year as imports rose faster than exports. Exports reached 38.14 billion leks in the first half of 2006 versus 33.25 billion leks a year earlier, while imports rose to 141.2 billion leks from 119.68 billion leks a year earlier. In January, the IMF approved a 19.12 million euro three-year loan deal with Albania, with the IMF’s market-related interest rate. Albania has so far been allowed to withdraw $10.8 million of the total loan. However, such loans will not be available for long. “The current IMF program is to be the last long-term program that we have in Albania and therefore it will be important for Albania to look ahead to find a new anchor for economic policies,” Westin explained. The IMF expects Albania’s economic growth to reach five percent this year, and six percent next year, fueled by strong growth in the services sector, public investment, and mineral exports. “Macroeconomic stability, however, is not sufficient to sustain economic growth. In fact, looking ahead for Albania a key challenge will be the structural reform agenda in order to sustain the high growth indicated so far,” according to Westin.
The primary sectors which are expected to support economic growth in 2007 are building, transportation and industrial production. Economic growth is expected to be 6 percent, with GDP for 2007 reaching 982.2 billion leks, from 899.7 billion leks in 2006.