Inability to compete seen as cause of increased Albanian trade deficit

TIRANA, June.19- The Albanian economy is facing problems competing in global markets as indicated by a trade deficit that increased 39 percent during the first quarter of 2007. Domestic production can no longer meet domestic demands which is greatly increasing imports in several markets. Exports, on the other hand, have seen progress only in the field of shoes and textiles. Even this positive development is due to some restrictive regulations within the EU to bar Chinese goods in the markets, otherwise their low prices would have influenced this sector as well. According to BoA”S report for the first three months of 2007, the high trade deficit that has characterized the external trade sector in this period has neutralized the positive effect of closing the deficit in the services accounts, resulting in the main drive for the overall spike in trade deficit.
Textiles perform in the export market
More than half of Albanian exports are re-exported goods, like shoes and textiles which make up for 53 percent and increased respectively for the period by 8 and 22 percent. Mineral exports increased as well doubling the overall volume. The main exported mineral was chrome, with 40 percent bought by China. The main problem with exports is the low diversification of goods and overall low levels of export for the quarter.
Imports fall due to high oil prices
During 2006, oil imports increased substantially, reaching a total value of $230 million, a record for the period, while the price change caused a 40 percent decline in the first quarter of 2007, BoA reports.
Specifically, one of the main causes for the large trade deficit is the high demand for energy, especially electricity accompanied by low production in the country and unfavorable hydroelectric situation. This combination has kept energy import purchases quite high.
Kosova, main market for regional exports
The export strategies towards the southeastern European region are becoming more aggressive, even for Albania, the report says. This group composes 10 percent of the total export value, with a substantial increase in Kosova. This year, four times the volume of goods has been exported to Kosova compared to last year, and Kosova has been the main destination for more than half of the total value followed by Montenegro, Macedonia and Serbia. The consequences of the Interim Agreement, implemented on December 1, 2006, have been positive for Albanian exporters
Still, the main markets receiving exports are Italy and Greece, with a total share of 82 percent.
Remittances, still the main cash inflow
Remittances from Albanian migrants throughout the world continues to be very large and greatly contributed to Albania’s growth rate. The have mainly assisted in balancing the economic development with external trade, and for the first quarter of 2007 they have registered a total value of 233 million euros, financing no less than 52 percent of the trade deficit. Remittances for this year are at a level 5 percent higher than in 2006.
Other transfers have been private ones, 39 million euros and state ones, 11 million euros.