Significant slowdown of economic growth in Albania

Significant slowdown of economic growth in Albania

IBNA Special Report

Tirana, October 7, 2014/Independent Balkan News Agency

By Edison Kurani

Albanian economy has seen a fall, due to the fact that several vital sectors have reduced their contribution. The data are official and they come from INSTAT (Albanian Institute of Statistics).  According to them, the construction sector, transport and industry have had a negative impact in the Gross Added Value, as they have reduced their contribution in the economy. In total for the second quarter of 2014, the economy saw a fall of 0.61% as opposed to the second quarter of 2013. This is the second fall of the Albanian economy, after the third quarter of last year. Such rate makes the 2% target for economic growth this year harder to be achieved.

INSTAT figures

According to INSTAT figures for the second quarter of 2014, industry saw a fall of 1,29%, as opposed to the second quarter of 2013.

Thus, according to INSTAT, construction sector saw a drop of 22.39%.

In the industry sector, the fall consists on the production sub-branch and distribution of electricity and gas. Therefore, the industry group saw a fall of 1.29% while communication saw a fall of 10.02%.

The transport activity continued to see a fall by 23,05% in the second quarter of 2014, compared to the same quarter of a year ago and this was mostly affected by air transport. Postal and Communication group saw a fall of 1,02% in the second quarter of 2014 compared to the second quarter of 2013.

There are also sectors with a positive contribution

Agriculture, commerce, hotels and restaurants have offered a positive impact in the Albanian economy. An important growth was seen in the agricultural sector by 3,18%. Head of INSTAT, Gjergj Filipi says that “Agriculture has positively contributed with 1,23%, hunting, forestry and fishing by 0,95%”.

“Commerce, hotels and restaurants have contributed with 0,94%”, says Filipi.

Albania increased its dependency toward imported energy

Problems with the energy sector in Albania do not only relate to the high level of losses in the network or with the deficit in the collection of arrears, but with the quantity of energy produced in the country.

Figures published by the Institute of Statistics show that the volume of the production of electricity in the power plants of the country marked a fall of 38% in the second quarter of this year, compared to the same period a year ago.

This way, Albania has increased its dependency toward imported energy. According to INSTAT, the fall of production has had an effect in the drop of the economy.

INSTAT figures come a few days after international financial institutions, such as the World Bank and International Monetary Fund, declared that the energy sector in Albania is on the verge of collapse and suggested the increase of the energy price as the only way out. Losses in the network and uncollected invoiced amount to 42% and this is the highest level in the Balkan region. Under these circumstances, the World Bank suggests an increase of 15 to 29% of the price of distribution, in order for the system not to go bust.

If no interventions are made based on the recovery plan, the World Bank projects deficit to amount to 550 million Euros in 2015 and 800 million Euros in 2018.

The World Bank allocated last month 150 million USD for the reformation of the system for the distribution of electricity.

The business sector against the increase of fiscal burden

On the other hand, the business sector is worried about the change of charges and believes that this will have a negative impact in the economy and household budgets. For this reason, its representatives recommend to the government not to increase charges, but to focus on minimizing losses in the network and collection of unpaid debts.

Head of the Chamber of Commerce and Industry of Albania, Nikolin Jaka says that it’s very important to improve the administration and not to penalize enterprises.

Jaka suggests that Albanian business needs support at a moment when competition is very strong. “The government must reflect in order not to have tax increases for the private enterprise. Let us find a way to improve the performance of administration and reduce taxes that penalize enterprise”, says he.

As far as business requests are concerned, minister of Finance, Shkelqim Cani admits that the dependency of the Albanian economy from private subjects amounts to 80%. “The economy is moving. Businesses are recovering. I understand the business community and its demands and I urge it to continue and address demands. Become more aggressive with your complaints, as we will try and meet your demands. You are the engine of our economy and 80% of the Albanian economy is in your hands. Your success is our success”, says Cani.

Opposition: Albanians are progressively being impoverished

The Albanian opposition sees a progressive growth of poverty. The head of the opposition, Lulzim Basha says that Albanians today are poorer than a year ago.

He adds that: “Unemployment and the bad economic situation are hitting thousands of households. The number of asylum seekers has doubled. Suicides too”.

The leader of the opposition says that “the country has remained without a real government” and criticizes the head of the government, which according to him “is happy when he sees small family businesses go bust”.

Basha says that the government, “instead of fighting poverty, it has chosen to fight Albanians, their properties and their businesses”.

The government says that there’s progress

While INSTAT’s report identifies an economic drop compared to last year, it suggests an economic growth within this year.

According to INSTAT, compared to the first quarter of 2014, the second quarter saw a 0,38% growth.

This is well exploited by prime minister Rama when he replies to Basha’s c criticism: “The opposition reacts about the INSTAT figures, but it still doesn’t know how to make a difference between yesterday and today”.

Minister of Finance, Shkelqim Cani says that economy is growing, as it has displayed signs of recovery. “The trends are positive”, says Mr. Cani. According to him, the increase of consumption and investments are the first signs that reflect a more sustainable situation in the future.

Meanwhile, as far as economic growth year after year is concerned, Mr. Cani says that: “Albania doesn’t have a galloping growth. It remains in those indicators, which, although they are not enthusiastic, they show that the growth is speeding up. We had an economic growth of 0.4% in 2013, which will be 2,1-2,2% in 2013. In 2015, it’s predicted to be 3,3%, while in 2016, 4%.”/ibna/