In 2015, Albania’s gross domestic product (GDP) is expected to rise by between 2.5% and 3.0%, according to forecasts of the World Bank, the European Bank for Reconstruction and Development, and the International Monetary Fund. The factors which will support the country’s economic growth include the start of the construction of the Trans-Adriatic Pipeline (TAP), part of which goes through Albania, growing domestic demand and reduction of the high levels of non-performing loans (NPLs). The economic recovery of the eurozone countries, Albania’s main trading partner, will also support growth. The economic downturn in Greece, which accounted for a large share of the remittances to Albania, is among the key risk factors for the country’s economic development.
Albania's economy managed to achieve its targeted growth rate of 2.1% in 2014 on the back of a recovery of domestic demand and increase in exports. However, the country's economic development was far below the pre-crisis levels when it was one of the fastest in Europe. The significant share of informal economy, the wide current account deficit and high unemployment continued to weigh on the country's economic growth.
A key development for Albania came in June 2014 when the European Commission granted it an EU candidate status. The decision reflected the progress the country has made in European integration and in implementing the necessary reforms.
Another important event was the approval by the International Monetary Fund (IMF) of 330 million euro in special drawing rights (SDR) arrangement under the Extended-Fund Facility in support of the Albanian governments' reform programme.
Remittances, on which the Albanian economy is highly dependent, grew by 8.6% to 592 million euro in 2014, according to the Bank of Albania. The increase was due to the improvement of the economic situation in the Western European countries, where most Albanian emigrants live.
Albania managed to climb to the 68th place in the World Bank's Doing Business 2015 report from the 108th place in the 2014 report. The country improved the regulatory framework in the area of starting a business, deal-
ing with construction permits, and registering property.
However, the country fell two places in the Global Competitiveness Report 2014-2015 published by the World Economic Forum and at the 97th spot among 144 countries was the poorest performer in Southeast Europe. The key factors which put pressure on the country's competitiveness were corruption, insufficient access to financing, and bureaucracy. In the 2013-2014 report Albania ranked 95th out of 148 countries.
The country's seasonally-adjusted GDP increased by 2.1% in 2014 and totalled 1,330 billion leks, according to data of the country's Institute of Statistics (INSTAT). Final consumption, which contributed 89.1% to the GDP, increased by 4.0% in value in 2014. Gross capital formation went down by 2.2%, contributing 24.8% to the GDP.
The country's seasonally-adjusted GVA increased by 2.2% and totalled 1,156 billion leks in 2014. The industrial sector grew by 0.6% in terms of value but its share in the GVA structure decreased to 14.4% from 14.7%. The services sector recorded a 4.1% annual increase, getting a 52.4% share in the GVA, up from 51.5% in the previous year. The agricultural sector registered an annual growth of 2.0%, but its share in the GVA inched down to 21.8% from 21.9%.
Industrial output ended 2014 with an annual growth of 5.2% with almost all sectors experiencing a rise – construction output jumped by 21.1%, the electricity and gas supply expanded by 19.0%, and the manufacturing industry went up by 10.3%. The output of the mining sector, however, dropped by 22.0%.
The average annual inflation slowed down to 0.7% in 2014, compared to 1.9% a year earlier. In 2014 the highest annual increase in consumer prices, of 10.5%, was registered by tobacco products. On the opposite end of the table, hospital services registered the
sharpest deflation – of 8.7%.
Unemployment in Albania increased to 17.6% of the total labour force in the fourth quarter of 2014 from 16.8% a year earlier, according to INSTAT data. The employed population aged 15 years and older was 1.067 million in the last quarter of 2014, up by 8.5% year-on-year. The unemployment rate among people aged between 15 and 24 went up to 33.9%.
Broad money (money aggregate M3) increased by an annual 4.0% and reached 1,195.1 billion leks in December 2014, according to data provided by Bank of Albania. The M2 money supply decreased by 4.2% to 722.4 billion leks. Money aggregate M1, or narrow money, jumped by 19.4% to 353.3 billion leks in December 2014.
Loans to the non-government sector totalled 549.1 billion leks in December 2014, up by 2.2% year-on-year, according to data of the country's central bank. Loans to non-financial corporations grew by an annual 2.5% to 404.5 billion leks in December, while household loans rose by 1.3%to 144.6 billion leks. Home purchase loans inched down by 0.1% to 102.5 billion leks.
Albania's gross external debt increased to 6.665 billion euro at the end of December 2014, up by 7.9% on the year. As of end-December 2014 long-term liabilities amounted to 5.454 billion euro, or 81.8% of the total debt, and short-term liabilities totalled 1.211 billion euro, equal to 18.7% of the total debt.
The current account deficit widened to 378 million euro in the fourth quarter of 2014 from 337 million euro in the like period a year earlier, according to central bank statistics data.
Source: International Monetary Fund (IMF) World Economic Outlook Database – April 2015