TIRANA, Oct. 3 – The Albanian economy grew by about 4 percent for the third quarter in a row at the end of the first half of this year, but the recovery of household consumption was twice lower, according to data published by INSTAT, the state statistical institute.
The growth rate is beyond expectations for a pre-general election period accompanied by a political deadlock and protests by the main opposition Democratic Party over guarantees about the June 25 elections, estimated to have negatively affected investor and consumer confidence.
The 4 percent growth rate in the second quarter of this year was again triggered by some major energy related investment such as the Trans Adriatic Pipeline and the Devoll Hydropower plant with no immediate positive impacts for the overwhelming majority Albanian households despite investment and employment benefits. The energy-related investment have turned the post-crisis long-ailing construction sector into the key driver of the Albanian economy for 2017 with a 1.4 percentage point contribution for the first half of this year.
The garment and footwear as well as the extractive industries producing the country’s top exports had a 0.7 percent contribution to the GDP, INSTAT said. A slight recovery in commodity prices and the reactivation of the domestic oil refiner had a positive impact.
However, agriculture, a key sector to the Albanian economy, employing about half of the country’s population and accounting for 20 percent of the GDP, grew by slightly above zero in the second quarter of the year and had a modest 0.16 percent contribution to GDP growth unveiling its low productivity, which is hampered by fragmentation of farm land into small plots and poor financing and technology employed.
Meanwhile, household consumption only slightly recovered by 2.27 percent in the second quarter of the year, in similar rates for the fourth quarter in a row.
The poor consumption levels also indicated by the volume of retail sales growing by a mere 1.6 percent in the April-June period reflects credit struggling to recover to positive growth rates amid declining but still high level of non-performing loans and poor consumer confidence and expectations in the pre- and post-election period.
The 4 percent growth rate for the first half of this year is slightly higher even compared to the Albanian government’s expectations of a 3.8 growth rate for 2017.
Third quarter prospects remain positive considering the ongoing major energy-related projects reviving the long-ailing construction sector in the past couple of years and a positive peak tourism season. However, the prolonged drought paralyzing domestic hydro-dependent domestic electricity generation and costly imports of some €80 million of electricity are expected to have a negative contribution.
The poor quality of growth in the past few years, mainly relying on some major energy-related projects has also worried Albanian economy experts who say higher growth is not translating into higher income for Albanian households.
Experts estimate Albania’s economy needs to grow by 6 percent annually in order to produce obvious welfare for its households who have taken to massive migration in the past couple of years, applying for apparently ineligible asylum in EU member countries, mainly in Germany and France.
The Albanian economy grew by a 6-year high of about 3.4 percent in 2016, but average wages in the country’s private and public sectors registered a paradoxical decline, hinting Albania’s post-crisis growth of 1 to 3 percent annually is failing to produce much-needed welfare in one of Europe’s poorest countries.
