TIRANA, June 10 – Foreign direct investment, tourism revenue and migrant remittances registered a significant boost in the first quarter of this year narrowing the gap in the current account, a key indicator of a country’s economic health.
Data published by the country’s central bank in its quarterly current account report shows FDI rose to 256 million euros in the first quarter of 2015, up from 172 million euros during the same period last year, registering a sharp 49 percent increase.
Lack of privatization revenue and the increase of the corporate income tax by 5 percent to 15 percent are estimated to have had a negative impact on foreign direct investment which suffered a slight decline in 2014.
FDI dropped to 878 million euros in 2014, down from a historic high of 945 million euros in 2013 registering a 7 percent decrease, according to revised data published by the country’s central bank. Lack of privatization revenue and government’s freeze of its stimulating policy on investments in hydropower plants by revising electricity prices downward played a major role in the lower FDI inflow. However, the Trans Adriatic Pipeline construction, bringing Caspian gas to Europe is expected to have a major impact on Albania’s FDI in the next four years, experts say.
Tourism revenue also registered a significant increase in the year’s first quarter when it climbed to 262 million euros, up from 232 million euros a year ago. Meanwhile, spending on trips abroad dropped to 218 million euros in January-March 2015, down from 253 million euros a year ago, unveiling a saving trend as the economy is estimated to have slowed down in early 2015 affected by severe floods and a drop in oil exports fuelled by lower international prices.
Tourism revenue registered a record high in 2014 when more than 3.6 million foreign tourists visited Albania, according to data published by the central bank and INSTAT.
Bank of Albania data shows tourism revenue rose to historic high of 1.2 billion euros in 2014, up from 1.1 billion euros in 2013 as the number of foreign tourists visiting Albania rose by 13 percent to a record high of 3.67 million. Spending on trips abroad also rose to an estimated 1.195 billion euros, up from 1.113 billion euros in 2013.
Migrant remittances, which have been on a downward trend since the onset of the global financial crisis in 2008, also marked a turning point in the first quarter of 2015 as top trade partners Italy and Greece, the hosts of around 1 million Albanian migrants, registered positive growth rates. Migrant remittances rose to 146 million euros in the first quarter of 2015, up from 118 million euros a year ago.
Migrant remittances slightly recovered to 592 million euros in 2014, up from 545 million euros in 2013, but remained almost 40 percent below their peak level in 2007 just before the onset of the global financial crisis, according to data published by the country’s central bank.
Bank of Albania data show migrant remittances hit a record low of 547 million euros in 2013, down from 680 million euros in 2012 and a historic high of 952 million euros in 2007 just before the outbreak of the global financial crisis.
The sharp cut in migrant remittances has also influenced on the slowdown of the Albanian economy in the past six years, especially the crisis in the still ailing construction sector.
Data published by the United Nations Conference on Trade and Development (UNCTAD) shows the share of migrant remittances to Albania’s GDP sharply dropped during the past decade from around 15.8 percent of the GDP in 2005 to 9.8 percent in 2010 and 6.16 percent in 2013.
Albania’s current account deficit narrowed to Euro 230 million in the first quarter of this year, down from 272 million euros during the same period last year.
“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 will increase the country’s export capacity and reduce its dependence on imports,” says the IMF.
