The GDP in Italy, Albania’s top trade partner, shrank by 2.3 percent in the first quarter of 2013 year-on-year while Greece registered a 5.3 percent shrink, according to Eurostat data
TIRANA, June 12 – The ongoing recession in Italy and Greece, Albania’s top trade partners and the hosts of more than one million migrant workers sending the overwhelming majority of remittances home, hints the Albanian economy will face another difficult year. After growing by 1.6 percent in 2012, the lowest rate in the past 15 years, top international financial institutions expect the Albanian economy to grow at the same rates while the Albanian government expects growth to accelerate to 3 percent.
The GDP in Italy, Albania’s top trade partner, shrank by 2.3 percent in the first quarter of 2013 year-on-year while Greece registered a 5.3 percent shrink, according to data published by Eurostat, the statistical office of the European Union.
Italy, the destination of more than 50 percent of Albanian exports, registered a 2.4 percent shrink in 2012, after positive growth rates in 2010 and 2011 and recession in 2008 and 2009.
Meanwhile, Greece, which currently remains Albania’ second most important trade partner only for imports has been in its worst ever recession since 2008.
Both Italy and Greece are expected to face another year of recession in 2013 before returning to positive growth rates in 2013, according to Eurostat forecasts.
The central bank has warned the Albanian economy will remain conditioned by the performance of top trade EU partners, the nature of fiscal policy and productivity.
The two neighbouring countries account for around 50 percent of Albania’s trade exchange, being the top investors in Albania and the overwhelming source of migrant remittances.
“Albania’s strong trade, investment and remittance ties to Greece and Italy, both of which face continued economic gloom, are likely to continue to constrain growth in the coming year, and the high level of public debt, at close to the statutory limit of 60 per cent of GDP, will limit the room for fiscal manoeuvre,” warns London-based EBRD.
Exports to top trade partner Italy, the destination of more than half of Albanian exports, have also been affected by the crisis there, with their growth rate slowing down. In 2012, Albania exported around 108 billion Lek of goods to Italy, up only 3.6 percent compared 2011, when exports grew by 28 percent year-on-year. Italy is Albania’s top trade partner with 50 percent of total exports and 30 percent of imports. More than 80 percent of footwear and garment products manufactured in Albania, which are the country’s main exports, go to Italy.
Meanwhile, exports to Greece, the country’s second most important trade partner have been severely affected by the crisis in the neighbouring country. Once the second destination of Albanian exports, Greece now ranks only the fifth most important partner with exports in 2012 at 9.4 billion lek, down 5.2 percent compared to 2011. Greece is the second most important partner for imports with trade exchanges accounting for 12.5 percent of the total.
Exposure to Italy
Sovereign debt crisis in Greece has shown little impact on the Albanian economy due to the limited role Greece plays in exports and imports and due to the recent flexibility shown by exporting firms to diversify geographically, says the Finance Ministry in its 2012-2014 economic and fiscal programme. However, the exposure of Albanian economy toward the Italian economy is greater. The share of Albanian exports to Italy is significant bigger at over 50 percent. Until now, financial problems in Italy have had little impact on trade, possibly due to the fact that this country is not always the ultimate destination of Albanian exports. However, a further deterioration in Italy would have a major impact on the Albanian economy. Remittances, which are used mainly to finance household consumption, are expected to fall significantly (in combination with those from Greece). Influence through foreign direct investment is expected to be smaller, as FDI from Italy decreased and their share of Albania’s GDP is relatively small.
