TIRANA, April 26 – Seven years after the onset of the global financial crisis, Albania’s trade exchanges with top trading partner Italy have remained unaffected but suffered a sharp cut with neighboring Greece, the country’s traditional second largest partner.
A report published by the country’s state statistical institute, INSTAT, shows Albania’s trade exchanges with Greece in 2009, soon after the global financial crisis broke out and Greece suffered its second year of recession, were at 74.3 billion lek (€536.7 mln) accounting for 13.9 percent of total trade exchanges. Seven years on, the trade volume with Greece which has seen its economy contract by about a quarter following a six-year recession, dropped to 52.3 billion lek (€378 mln) or 6.6 percent of the total.
The six-year recession in Greece, the traditional second largest trading partner and top foreign investor in Albania, affected Albania by reducing exports from 7.4 percent of the total in 2009 when it was the second top destination of Albanian exports to 3.9 percent in 2015 when it was the fourth most important destination of exports. Remittances from Greece, where an estimated 500,000 Albanians live and work have also suffered a sharp decline during the past seven years.
Albania’s exports to neighboring Greece are dominated by “garment and footwear” whose exports to Greece have suffered a considerable decline and initially led to the closure of several plants in southern Albania during the first years of Greece’s recession.
The situation with neighboring Italy the country’s traditional top trading partner has been more stable with exports and imports continuing to increase although their share in the country’s total trade exchanges only slightly increasing compared to the onset of the global crisis.
INSTAT data shows trade exchanges with neighboring Italy rose to 288.7 billion lek (€2 billion) in 2015, accounting for 36.6 percent of the total trade volume compared to 177 billion lek (€1.28 billion) or 33.2 percent of the total in 2009.
The poor diversification of Albania’s exports heavily relying on oil and base metals whose prices are currently at a record low is expected to have another negative impact on the country’s exports this year. Affected by a sharp drop in international oil and base metal prices, Albania’s exports dropped by 5 percent in 2015, returning to negative growth rates after a contraction in 2009 soon after the onset of the global financial crisis.INSTAT says Albania’s exports grew by an average of 8.9 percent from 2011 to 2015. Albania is a net importer with exports covering only about half of imports.
“Minerals, fuel and electricity” saw its share in the country’s exports drop to 26.5 percent in 2015, down from 33.6 percent in 2014 and a record high of 40 percent in 2013 when oil prices were at their peak before they embarked on a downward trend in mid-2014 which has taken them to a 12-year low.
Exports are keeping their pace only thanks to the traditional garment and footwear industry, employing about 100,000 people and relying on cheap labour costs. Their share in the total exports in 2015 increased to 37 percent in 2015, up from 28 percent in 2012-2013 when they temporarily lost their traditional lead position to the rapid growing mineral and fuel exports.About 90 percent of footwear and garment products manufactured in Albania, which are the country’s main exports, go to Italy.
The Albanian economy is expected to benefit from a slight recovery in the euro area in 2016 especially top trading partner Italy although uncertainties in neighboring Greece continue.
In its latest World Economic Outlook, the IMF expects Italy, the country’s top trading partner accounting for 50 percent of total exports and 30 percent of imports, to accelerate to 1 percent in 2016 after a 0.8 percent GDP growth in 2015 when it returned to positive growth after three years of contraction.
Meanwhile, neighboring Greece, the country’s traditional second largest partner and top foreign investor, is expected to slightly contract for the second year in a row after escaping its six-year recession in 2014. The IMF expects the Greek economy to contract by 0.6 percent in 2016 but register growth rates of 2 to 3 percent from 2017 to 2020.
London-based EBRD has earlier warned “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 and the high level of public debt will limit the room for fiscal manoeuvre.”
