TIRANA, Feb. 3 – Six years of crisis in the eurozone and top trade partners Italy and Greece, the hosts of around 1 million Albanian migrants, have almost halved the amount of remittances sent home and their share to the GDP.
Data published by the United Nations Conference on Trade and Development (UNCTAD) shows the share of migrant remittances to the 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.
In a country report on Albania, the IMF notes that despite slowing remittances, Albania’s FDI potential as underlined by recently agreed gas pipeline and hydropower projects amounting to a projected $1.5 billion, combined with increasing domestic production that lowers reliance on imports (especially for agricultural products), is expected to improve external sustainability over the medium and long run.
Latest Bank of Albania data shows migrant remittances during the first three quarters of 2014 registered 406 million euros, slightly up from 405 million euros in 2013.
On a downward trend since the onset of the global financial crisis, migrant remittances whose overwhelming majority comes from around 1 million migrants in neighbouring Greece and Italy, continued shrinking even in 2013.
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 five years, especially the crisis in the still ailing construction sector.
The sectors affected the most by remittances are construction, services and food, which are also the key contributors to Albania’s GDP. It is believed that the sharp contraction in construction has partly been a result of declining inflows from workers abroad.
A study carried out by the Bank of Albania has found that remittances, one of the main sources of income for thousands of families in Albania, are very sensitive to the economic activity in the Eurozone, where most Albanian immigrants live and work. Remittances also constitute a critical driver of Albania’s domestic demand. Estimates suggest that for the overall economy (excluding agriculture) a 10 percent decline in remittances would lead to a 3.6 percent reduction in domestic demand, as provided by the index of sales.
In addition to crisis impacts, experts say remittances will continue to decline because most immigrants are creating their own families abroad and often even taking their parents with them.
In its 2013-2017 programme, the Socialist Party-led government recognizes the limitations of the development model based on a remittances-fuelled construction boom and raw material exports, and aims to shift the focus to new sources of growth by identifying manufacturing, energy, tourism and agribusiness as priority areas.
