TIRANA, May 20 – Low international oil prices are expected to have a muted effect on Albania’s growth and on the balance of payments, as pass-through is weak and Albania is only a small net oil exporter, says the IMF in its latest report.
Domestic crude oil production is projected to decrease in 2015 and the largest producer has halved planned investment, says the IMF implying Canada-based Bankers Petroleum, which is the country’s biggest oil producer and exporter. However, the negative effect on growth is expected to be partly offset by a boost to consumption and non-oil investment.
The low oil prices could also cause a moderate downward revision in inflation for 2015. The disinflationary impact would be moderate, given the low pass-through historically and the recent hike in the excise tax on gasoline.
The highest risk is that low international oil prices could also drive a downward revision of fiscal revenues in 2015, reflecting the direct effects of lower oil prices on oil-related royalties, warns the Fund. “The impact on company profits and thus corporate income tax collections would only materialize in 2016, because of reporting lag.”
Low oil prices could also cause a neutral immediate impact on the current account, but potentially negative effects over the medium term. “While the exports of crude and imports of refined products have fallen largely in tandem, the decline in projected foreign direct investment (FDI) to the oil sector has long-term implications for output and exports.”
The oil industry’s contribution to growth was about 0.5 percentage points in 2010–14.
The current account deficit is projected to remain high over the medium term, but it is largely driven by FDI-financed import-intensive infrastructure projects, such as the Trans Adriatic Pipeline and the Statkraft/Devoll hydropower projects. When completed, these projects are expected to increase the country’s export capacity and reduce its dependence on imports.
