TIRANA, April 11 – The Albanian economy is estimated to have grown by 2.61 percent in 2015, in line with the government’s revised forecast after growth expectations were lowered by 0.4 percent following a sharp cut in international oil prices and spillover effects from the escalating crisis in neighboring Greece.
State statistical institute, INSTAT, reported the Albanian economy grew by an annual 2.15 percent in the final quarter of 2015 fueled by the long-ailing construction sector which apparently received a boost because of public investments and some energy-related investments from the Trans Adriatic Pipeline and a major hydropower plant in southeastern Albania. The growth rate in the final quarter of 2015 corresponds with the launch of an aggressive nationwide campaign to tackle high levels of tax evasion which formalized thousands of businesses previously operating informally but failed to boost government revenue.
What’s concerning is that the key agriculture sector, which employs about half of the country’s population but provides only 20 percent of GDP, had a negative contribution to the GDP, likely affected by massive floods that hit the country in early 2015.
INSTAT reports the agriculture sector contracted by 1.94 percent in the final quarter of 2015, registering a decline for the fifth consecutive quarter. For the whole of 2015, the agriculture sector, which is seen as key to compensate for the pre-crisis construction and remittances boom, dropped by 0.87 percent. The agriculture ministry has called into question INSTAT’s figures urging the state-run statistical institute for a review of its methodology, claiming that agriculture exports increased by 25 percent in 2015.
The industry sector continued having a positive contribution only thanks to the garment and footwear industry, the country’s top exporting industry and one of the key private sector employers. Meanwhile, the extractive industry was severely affected by a sharp decline in international oil and base metal prices affecting exports, investment, employment and government revenue.
Despite the economy registering an annual growth rate of 2.6 percent, up from 2 percent in 2014, household consumption declined by 0.17 percent in 2015 following modest growth rates in the previous five years.
The Albanian government expects the country’s economy to grow by 3.4 percent in 2016, following growth rates of 1 to 3 percent since the onset of the global crisis in 2009 and a pre-crisis decade of 6 percent. However, several international financial institutions, including the World Bank, have already revised down Albania’s growth prospects to 3.2 percent on declining exports due to a sharp decline in commodity prices.
A decline in commodity prices affecting exports, sluggish domestic consumption, public debt at around 72 percent of the GDP, non-performing loans at about 20 percent, exports and lending struggling to recover to positive growth rates and an ongoing decline in migrant remittances hint Albania will face another tough year in 2016.
The sharp decline in international oil and base metal prices has already negatively affected investment, jobs and government revenue from the royalty tax in one of the top exporting industries and is seen as the key threat to Albania’s growth prospects for 2016.
