TIRANA, June 2 – A double digit recovery in private investments but a moderate decline in consumption gives a mixed picture of the Albanian economy in the first four months of this year when it was also affected by massive floods and is also suffering a decline in exports affected by a slump in international oil prices.
Arjan Kadareja, an economy expert and a former member of the central bank’s supervisory council, says some key indicators such as exports, tax revenue and especially VAT income, as well as lending to the economy does not leave much room for optimism in 2015.
Data published by the finance ministry shows the value added tax, which is levied at a fixed 20 percent rate on almost every product and service and accounts for around one-third of total government revenue, dropped by a considerable 9 percent in the first four months of this year, hinting sluggish domestic consumption.
Meanwhile, INSTAT latest report shows imports of “machinery, equipment and spare parts” rose by a significant 19 percent to 34 billion lek (€ 238 mln) in January through April 2015 hinting a significant recovery in private investments. The increase has also been fuelled by a rising number of machinery and equipment imports included in the VAT free list.
The Albanian economy is estimated to have slowed down in the first quarter of 2015 when the country suffered severe floods and exports declined on lower international oil and base metal prices.
The situation is also confirmed by the latest survey conducted by the country’s central bank showing that after recovering for four consecutive quarters, Albania’s Economic Sentiment Indicator, measuring both business and consumer confidence, dropped by 4.6 percentage points in the first quarter of this year, but yet remained 0.5 percent above its long-term historical average.
Top trade partners Italy and Greece escaping recession and the start of the Trans Adriatic Pipeline construction are expected to have a major impact on the Albanian economy in 2015 when government and international financial institutions expect a recovery to 3 percent after sluggish GDP growth rates of 1 to 2 percent in the past three years.
Albania’s prospects have in particular improved as top trade partner Italy is heading toward recovery and Greece has escaped 6-year recession. The two neighbouring countries account for around 50 percent of Albania’s trade exchanges, being the top investors in Albania and the overwhelming source of migrant remittances.
Albania’s greatest news for 2015 is that the Trans-Adriatic pipeline bringing Caspian gas to Europe will finally kick off its construction in its Albanian section in the second half of the year.
Public debt at around 70 percent of the GDP, non-performing loans at around a quarter, lending struggling to remain at positive growth rates and a slowdown in exports are considered key barriers to Albania’s growth.
