TIRANA, Sept.1 – Albania’s trade exchanges with Italy and Greece, the country’s top trading partners, foreign investors and sources of remittances, registered a slight decline in the first half of this year despite the neighboring countries recording positive growth rates.
Data published by the country’s state statistical institute, INSTAT, shows trade exchanges with top trading partner Italy dropped to 167.8 billion lek (€1.19 billion) in the first seven months of this year, down 2.4 percent compared to the same period last year on lower exports.
Exports to top trading partner Italy, the destination of around half of Albanian exports, dropped to 72.3 billion lek (€508 million) in the first seven months of this year, down 11 percent year-on-year affected by lower international fuel and base metal prices. A slowdown in exports of garment and footwear exports, the country’s top exports 85 percent of which has Italy as its destination, also affected the situation.
Meanwhile, Albania’s imports from Italy increased by 5 percent to 95.5 billion lek (Euro 677 million) in the first seven months of this year, accounting for almost a third of total imports.
Trade exchanges with Greece also deteriorated in July when the crisis in the neighboring country escalated with the banks closure and limits imposed on cash withdrawals.
INSTAT data shows trade exchanges with neighboring Greece dropped to 31.3 billion lek (Euro 222.3 million) in January-July 2015, down 11 percent compared to the same period last year, with Greece maintaining only a slight advantage over third trade partner China.
Exports to Greece registered a modest 3.8 percent increase in the first seven months of this year, but dropped by 6 percent last July when the crisis unfolded paralyzing several plants in southern Albania.
Once the second destination of Albania’s exports, Greece now ranks the fifth destination after Italy, Kosovo, Spain, and Turkey.
Imports from Greece also dropped to 25.8 billion lek (€181 million) in the first seven months of this year, down 14 percent compared to the same period last year, accounting for 10 percent of the total.
The escalating crisis in neighboring Greece will affect Albania’s growth by at least 0.25 percentage points, Albania’s central bank says in its latest analysis.
The Albanian government and the IMF have already revised Albania’s GDP growth for 2015 to 2.7 percent, down from an initial 3 percent on lower international oil prices affecting exports and the deterioration of the situation in Greece.
Experts say the spillover risks from the Greek crisis are relatively low and mainly affect exports and remittances, already on a downward trend since Greece plunged into recession in 2008. Meanwhile, the three Greek bank subsidiaries in Albania are considered safe because of operating as independent from their parent banks.
Six years after the onset of the global financial crisis, exchanges with top trade partner Italy have remained unaffected but suffered a sharp shrink with neighboring Greece which escaped its six-year recession in 2014, but has been facing a tough time even in 2015 due to escalating debt crisis and difficult talks with its creditors.
“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,” London-based EBRD has earlier warned.
Italy is Albania’s top trade partner with 50 percent of total exports and 30 percent of imports. More than 80 percent of footwear and garment products manufactured in Albania, which are the country’s main exports, go to Italy.
Once the second destination of Albanian exports, Greece now ranks only the sixth most important. However, Greek businesses are present in almost every sector of the Albanian economy, including strategic ones such as telecommunications, the banking system, energy, industry, construction, trade and tourism, significantly contributing to the country’s economic growth, ranking it the country’s largest foreign investor.
Top trade partner Italy escaping recession and the start of the Trans Adriatic Pipeline construction are expected to have a major impact on the Albanian economy in 2015 after sluggish GDP growth rates of 1 to 2 percent in the past three years.
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.
