TIRANA, Sept. 28 – Albania is expected to have one of the region’s highest economic growth in the next couple of years but its public expenditure, revenues, debt and exports in percentage of GDP are among the lowest in six EU aspirant Western Balkans countries, according to a World Bank report.
The latest Southeast Europe Regular Economic Report expects Albania to grow by 3.2 percent in 2016, above the region’s average of 2.7 percent but 0.2 percent lower compared to the government’s more optimistic forecast of 3.4 percent. The growth forecasts for 2017 and 2018 are at 3.5 percent, at almost the same levels compared to the five other SEE countries of Serbia, Macedonia, Montenegro, Kosovo and Bosnia and Herzegovina.
At 27 percent of the GDP, Albania’s public revenues as a percentage of the GDP is among the region’s lowest, unveiling high levels of informality and inefficiency by the public administration although Albania has one of the region’s highest taxes. The region’s average is at 35.5 percent of the GDP.
Albania also lags behind in public expenditure which in 2016 is estimated at 30 percent of the GDP compared to a regional average of 39 percent of the GDP.
Albania spends about 10 percent of its €10 billion GDP on social benefits, 4.7 percent on wage bill and only 3.7 percent of its GDP on public investment.
Albania also lags behind when it comes to exports which represent only about 7 percent of the country’s GDP compared to a regional average of 26.7 percent.
At 72.5 percent of the GDP, Albania has the third highest public debt in the region after Montenegro’s 82.6 percent and Serbia’s 76.8 percent.
In its latest South East Europe Regular Economic Report, the World Bank says Albania’s poverty, measured against the regional standardized benchmark of US$5 a day (in 2005 purchasing power parity) slightly dropped to 45.5 percent of the population in 2016 considerably higher than in neighboring Macedonia, Montenegro and Serbia.
In Albania, formalization efforts have added to the economic recovery, leading to a 6.7 percent growth in employment, mainly in services and manufacturing, says the report.
This accelerating growth is helping improve employment in Albania and is working to drive down poverty in the region, notes the report. Unemployment declined. Employment was 6.7 percent in Albania in the first half of 2016, thanks to growth and labor market reforms.
“Countries with strong reform programs have seen a rise in investment which became a solid driver of growth in the first half of 2016, with remarkable contributions of private investment to growth in Serbia and Albania,” says Katia Vostroknutova, World Bank’s Lead Economist and one of the authors of the report.
Along with reviving consumption, private investments supported by large projects in the energy sector are expected to lead the recovery in Albania, contributing to 2/3 of the recovery over 2016-2018.
“Stronger growth is starting to have a positive impact on poverty and unemployment in the region,” notes Ellen Goldstein, World Bank Regional Director for Southeast Europe. “While the unemployment rate remains high, at around 25 percent on average, rates declined in five of the six countries of Southeast Europe this year.”
The report concludes that the region has continued growing in the face of a difficult European and global environment. To sustain growth, further reforms are advised to maintain macroeconomic stability, stimulate private sector activity, enhance the effectiveness of the public sector, and build resilience to external shocks.
Albania’s GDP per capita, an indicator for a nation’s economic situation, slightly rose to €3,440 in 2014 but remained among eight regional EU aspirants, according to data published by Eurostat, the statistical office of the European Union.
At €3,440 in 2014, Albania’s GDP per capita was probably higher only compared to Kosovo whose 2013 GDP per capita was at €2,835. The GDP per capita in Bosnia and Herzegovina, Macedonia, Serbia, Montenegro and Turkey ranged from €3,641 to €7,819 in 2014.
However, when it comes to the size of the GDP, Albania leaves behind neighbouring Kosovo, Montenegro and Macedonia. Albania’s GDP was estimated at about €10 billion in 2014 when the economy grew by 2 percent.
The Albanian economy has grown between 1 to 3 percent in the past seven crisis years compared to a pre-crisis decade of 6 percent annually.
