TIRANA, April 3 – Albania’s economic growth hit a six-year high in 2016 when it grew by an estimated 3.46 percent boosted by the long-ailing construction sector which is back as a key driver of growth fuelled by some major private sector energy-related investments and a boost in the trade and tourism industry, according to INSTAT, the state-run statistical institute.
After years of recession following the pre-crisis boom, the construction sector has returned to one of the key contributors to growth in the past couple years fuelled by some major foreign investments such as the Trans Adriatic Pipeline and some big hydropower plants, already underway and in their peak construction stage.
Meanwhile, public investments have had a modest contribution as the government has been applying a tight spending policy in a bid to bring down public debt, currently at 71 percent of the GDP, a high level for the current stage of the country’s economic development, with its high servicing costs affecting much needed investment in key infrastructure, health and education sectors.
Construction of new apartment blocks has also been sluggish as thousands of apartments nationwide remain unsold at a time when demand also remains sluggish as banks keep lending tight amid concerns over non-performing loans at about 20 percent.
INSTAT data shows the construction sector grew by an annual 6.1 percent in 2016, down from 14 percent in 2015 when it overcame a three-year recession that contracted the sector by about a third.
The construction sector accounted for about 10 percent of Albania’s 10 billion euro GDP in 2016, down from a record 18 percent of the GDP in 2008 just before the onset of the global financial crisis.
The “trade, transport and travel” sector also had a key contribution to the 2016 growth as it grew by 5.6 percent, mainly boosted by the tourism industry.
Industry continued to have a positive contribution mainly thanks to the state-run electricity sector further recovering as it collects hundreds of millions of euros in accumulated unpaid bills and enjoyed good production of electricity due to favourable hydro situation, securing about 80 percent of the country’s electricity needs.
Meanwhile, the extractive industry continued suffering as commodity prices only slightly picked up from the mid-2014 slump, severely affecting the country’s key oil and mineral exports. The processing industry, represented by the key garment and footwear industry, employing about 100,000 people and producing the country’s top exports, registered a strong 18 percent growth in 2016.
“Agriculture, forestry and fishing,” a sector employing about half of the country’s population, but providing only 20 percent of the GDP continued underperforming in 2016 when it grew by a mere 0.46 percent, the lowest level since at least 2010. The figures unveil the sector’s low productivity which is hampered by fragmentation of farm land into small plots and poor financing and technology employed.
The 3.46 percent GDP growth for 2016, a flash estimate subject to revision, is in line to the Albanian government’s 3.4 percent growth target and slightly higher compared to forecasts ranging between 3 to 3.2 percent made by international financial institutions.
The government expects the economy to slightly accelerate to 3.8 percent in 2017, but experts have warned economic and political uncertainties related to next June’s general elections could put public finances and investment at risk.
The 2017 growth is expected to be driven by some major energy-related investment and a boost in consumption and tourism.
The economic performance of top trading partners and investors Italy and Greece, the hosts of about a million Albanian migrants, and the progress of commodity prices affecting the country’s oil and mining industry are also expected to be key for the 2017 economic 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.
