Al­ba­nia

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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

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