TIRANA, June 30 – Albania’s GDP growth recovered by about 4 percent year-on-year in the first quarter of this year, registering one of the highest quarterly growth rates since 2009 when the country’s economic growth embarked on a downward trend affected by global crisis and main EU trading partners’ spillover effects.
A report by state-run statistical institute, INSTAT, shows the first quarter GDP growth was fuelled by the construction, trade and energy sectors.
The until recently long-ailing construction sector was again a key driver of the Albanian economy with a 1 percentage point contribution to the first quarter growth, mainly thanks to some ongoing major energy-related projects. The Trans Adriatic Pipeline bringing Caspian gas to Europe and the Devoll Hydropower plant, are already in their peak construction stage, being the main source of foreign direct investment in the country which peaked at about €1 billion in 2016.
Once the key driver of the Albanian economy in the pre-crisis decade, the construction sector now accounts for only about 11 percent of the country’s GDP, down from a record 18 percent of the GDP in 2008 just before the onset of the global financial crisis.
The sector has also seen a boost because of an increase in public investment, mainly urban redevelopment projects, and a rise in the number of construction permits issued by local government units after the launch of electronic application system last year.
Albania’s pre-crisis growth of about 6 percent annually was mainly fuelled by a boom in a construction sector and high inflows of remittances, which have almost halved in the past decade following prolonged recession in Greece and Italy, the country’s main trading partners and the hosts of about 1 million migrants.
“Trade, hotels and restaurants” had a 0.51 percentage point contribution to the first quarter growth mainly because of a recovery in wholesale trade and road transport. The “Trade, hotels and restaurants” sector accounts for about 16 percent of the country’s GDP, being the second largest after agriculture.
The first quarter GDP growth was also fuelled by a recovery in hydro-dependent domestic electricity production and the health sector, where private run operators are gaining a key contribution running several big hospitals and even engaging in concession contracts with the Albanian government over public services such as check-ups, hemodialysis, lab and surgical equipment services.
The key agriculture sector, employing about half of the country’s population but accounting for only 20 percent of the GDP, had a only 0.27 percentage point contribution in the first quarter of this year, apparently negatively affected by the freezing January temperatures. Albania faced the coldest winter in three decades this year with a negative on agriculture crops and greenhouse products.
Despite the higher investment-fuelled growth in the first quarter of the year, household expenditure grew by only about 2 percent, unveiling hesitation and uncertainties as credit struggles to recover amid high levels of non-performing loans.
In its latest report, INSTAT also slightly revised downward Albania’s 2016 GDP growth rate to about 3.37 percent which is still at a six-year high.
The Albanian government expects the economy to slightly accelerate to 3.8 percent in 2017 and pick up between 4.1 to 4.3 percent in 2018-2020 fuelled by some major energy-related projects, a recovery in domestic consumption and a boost in the emerging tourism industry.
Improved economic prospects for top trading partners and investors Italy and Greece, the hosts of about a million Albanian migrants, and a recovery in commodity prices with a key impact on the country’s oil and mining industry are expected to have a positive effect on Albania’s 2017 growth prospects.
The Albanian economy has been growing by an average of 1 to 3 percent annually since 2009 following a pre-crisis decade of 6 percent annually, the growth rate estimated to bring welfare to the EU aspirant Balkan economy.
