IBNA Special Report/The European Commission says that the Albanian economy has grown by 1,8% during 2014. This figure is lower than the expectation of the Albanian government, which claims that the growth was 2%. Tahseen Sayed, representative of the World Bank in Albania, says that 2015 is expected to bring economic benefits to Albania. Expert Arben Malaj says that the government must take the first steps in economy. Expert Suzana Guxholli suggests that the fall of exports prevented the expected economic growth
Tirana, January 16, 2015/Independent Balkan News Agency
By Edison Kurani
In 2014, economic growth in Albania was 1,8% or 0,2% smaller than the expectations of the Albanian government and other international institutions, such as IMF and World Bank, which predicted a 2% growth.
The figures have been made public in the fourth quarter report of the European Commission for the EU associate member countries.
The economic report of the European Commission is published every three months. It analyzes the economies of seven countries that have applied for EU accession. According to the report, Albania has the lowest economic growth compared to other country, excluding Serbia where the economy saw e negative growth of -2%.
The highest growth was seen in FYROM with 3,9%, followed by Turkey with 2,8%. Part of the analysis of the aspiring countries that is published every 3 months are also Kosovo, Montenegro, Bosnia and Herzegovina and Iceland.
As far as Albania is concerned, the report says that the 1,8% annual growth was mainly attributed to the third quarter where growth was 3,3%. The main impact in this growth was made by commerce and services, construction and industry a little less.
The report says that growth of private consumption continues, having a positive effect in the acceleration of the growth.
The report also praises the rise of budgetary revenues by 12,6% on an annual basis. It says that the reduction of budget deficit has mainly come from the reduction of investment expenses.
Nonperforming loans are a mounting concern
The economic report of the European Commission also identifies problems in the banking sector as far as nonperforming loans are concerned. According to the report, Albania has seen an increase of the level of NPLs at a level of 24,9% in the third quarter as opposed to 24,1% in the first quarter. The report demands more efforts in order to clean banks’ balance sheets in a sustainable way.
Low consumption is a serious problem
The latest reports of the Bank of Albania are not optimistic as far as consumption is concerned. INSTAT doesn’t see a significant rise in consumption. Experts say that the Albanian economy faces the risk of passing into negative prices. According to them, this can come as a result of low consumption in the country, but also as a result of deflation which is also seen in the European Union market.
For economists, deflation is more dangerous than inflation. According to them, at first glance, low prices may be seen as a good thing by consumers, but those prices can turn into an economic bomb for the country, because there’s a fall of production, investments and economic growth.
Malaj: The government must inject money into the economy
Financial expert, Dr. Arben Malaj says that the government will not be able to secure a dynamic economy with increasing production and consumption on its own. “The government must start with the planned investments, in order to inject money into the economy”, suggests Mr. Malaj.
According to him, Bank of Albania has played its role in this aspect, but there’s still room to encourage lending.
Prof. Malaj also talks about NPLs which the European Commission report considers them to be worrying. Former minister of Economy and Finances, says that the consequences of NPLs also affect all institutions and the public. He says that if this problem is neglected, the country may head to a crisis.
“We are at the highest percentage of nonperforming loans. In this situation, all opportunities must be exploited in order to act and this also includes the government contribution”, suggests Mr. Malaj.
Guxholli: Fall of exports stopped economic growth
As always, the opposition is skeptic about the economic situation and says that the 2% growth that the government claims that it has been achieved in 2014, has not been achieved, because exports were far from expectations.
Suzana Guxholli, head of the Department for Energy and Natural Sources at the Democratic Party, says that last year, foreign trade deteriorated, with experts that weakened month after month and imports increased.
“Exports were the only hope for the economy to grow by 2% this year, but this hope has faded and the economy is heading to depression”, says Mrs. Guxholli, former economic adviser of PM Berisha.
She says that exports this year grew by 5% or 190 billion ALL, but she adds that this figure is three times smaller than the rise seen last year.
Guxholli says that what worries her is not only the weakness of exports, but also their unclear future.
Albanian exports mainly consist of unprocessed raw materials for which prices have significantly fallen. Due to the lack of processing, exports of the country are thus losing a chance to benefit from a strong dollar in international markets.
Sayed: Economy is improving, 2014 is expected to be a better year
The representative of the World Bank in Albania, Tahseen Sayed says that the year ended with a revival of the Albanian economy. According to her, this revival is attributed to several factors. “In the last months of 2014, economic growth has revived as a result of the improvement of lending, payment of arrears to businesses and the growth of business confidence.”
2015 is expected to bring economic benefits for Albania, says Sayed. According to her, economic growth this is year is expected to be 3%. “We expect growth for 2015 in Albania to be around 3%. If positive performance continues if growth will be assisted by big projects and foreign investments that relate to the Trans Adriatic Pipeline (TAO) and investments in the energy sector. /ibna/