While Albania maintained a relatively strong position compared to other countries in the region and avoided economic recession, macroeconomic stability felt the negative pressure of the global economic crisis, which is directly affecting the wellbeing of the population, says the UN report
TIRANA, July 23 – The weak performance of key economic partners such as Greece and Italy has exerted its toll on the Albanian economy and on credit availability to businesses, according to a UN annual progress report for 2012. The report highlights the contributions of the United Nations Agencies in Albania to the national priorities in the area of governance and rule of law, economy, environment, regional and local development, and inclusive social policy.
The ongoing recession in Italy and Greece, Albania’s top trade partners and the hosts of more than one million migrant workers sending the overwhelming majority of remittances home, hints the Albanian economy will face another difficult year, experts say. After growing by 1.6 percent in 2012, the lowest rate in the past 15 years, top international financial institutions expect the Albanian economy to grow at the same rates while the Albanian government expects growth to accelerate to 3 percent. Italy, the destination of more than 50 percent of Albanian exports, registered a 2.4 percent shrink in 2012, after positive growth rates in 2010 and 2011 and recession in 2008 and 2009. Meanwhile, Greece, which currently remains Albania’ second most important trade partner only for imports has been in its worst ever recession since 2008.
Both Italy and Greece are expected to face another year of recession in 2013 before returning to positive growth rates in 2014, according to Eurostat forecasts.
The UN report says exposure to the euro-crisis has also caused decline in remittances, which is a vital source of income for many Albanians. “Overall, while Albania maintained a relatively strong position compared to other countries in the region and avoided economic recession, macroeconomic stability felt the negative pressure of the global economic crisis, which is directly affecting the wellbeing of the population.”
In economic terms, Albania has so far managed the headwinds from the economic crisis reasonably well. Albania was the only country in South Eastern Europe that continued to grow in the immediate aftermath of the global financial crisis, with robust growth rates of over 3 percent in 2010 and 2011. However, in light of the weakening performance of European Union markets, growth deceleration emerged in the second half of 2011. Ultimately, it was only in 2012 that Albania’s economy first experienced a contraction. According to national statistics, gross domestic product fell by 1.2 percent in the first quarter of 2012. Sound monetary policy nevertheless ensured moderate inflation rate, in line with the Albanian Central Bank’s target, and contributed to the maintaining of macroeconomic stability. However, Albania’s debt has almost reached the ceiling of 60 percent of gross domestic product established in the organic budget law, which is among the highest in the region, says the report.
The European Commission moreover observed that structural reforms seem to have lost steam in part due to difficulties in the domestic political dialogue. The Commission noted that challenges in the area of rule of law, inadequate levels of infrastructure and human capital, as well as the
informal economy, are among the factors that hamper further economic development.
Government expenditure as a percentage of the gross domestic product only mildly decreased between 2011 and 2012, from 28.5 percent to 27.9 percent respectively. Over this period, total revenues remained essentially at the same level with 25.1 percent of gross domestic product for 2011 and 24.8 percent for 2012. The Government’s national budget of 2012 amounted to approximately USD 3.78 billion, with priority areas visualized in the graph on the budget structure broadly following the pattern of the previous year.
Globally, Albania ranks 70th in the UNDP Human Development Index of 201212, with an overall Human Development Index value of 0.749.
The UN works closely with the Government to promote foreign direct investment, increase general competitiveness, and improve the business climate in Albania. Net foreign direct investment inflow as percentage of Gross Domestic Product remains well above 9 percent, confirming a positive trend and placing Albania among the top destination countries in the Western Balkans.
