Albania
Economic Overview
The Albanian economy grew strongly during 2000- 2002, although there has been a downward trend towards the end of this period. The Bank of Albania explains the slowdown of the annual growth rate of the economy as being a result of incomplete structural reforms, low level of foreign investments and the somewhat relaxed economic activity after the very high growth in the period 1998-1999.
Albanian economic growth of 4,7 percent for 2002, attributed to the expansion of private sector, was mainly supported by transport, services and construction sector activity, while the public sector is constantly shrinking. However, economic growth of 2002 is the lowest as compared to the period of 1998-2002, with a deviation of 1.3 percentage points from the announced target of the beginning of the year (6 percent). Nearly all economy sectors, especially industry and agriculture, have indicated lower growth rates than the projections.
The structure of the Albanian economy is changing as well. Agriculture and live animal sector, which traditionally have sustained economic development, have a reducing weight, while trade and services indicate an increasing contribution. These structural changes are in accordance with the ought-to- be- taken development of a country targeting integration in EU. However, the industry sector evidences no significant development yet. Agricultural production for 2002 grew by 2,1%, while industrial output increased by 2 percent, indicating the lowest growth rate compared to the rest of the sectors. Industry has been mostly suffering from the electric power problems, present for almost three years, at least. The transport sector kept on displaying high growth rates. In 2002, output from this sector demonstrated a 9.1 percent growth. The unemployment level in 2002 remains high – 15.8%. The rate of expansion of the private sector activity and public sector investments is not high enough to generate sufficient workplaces. The annual inflation rate at the end of 2002 reached 2.1 percent. Budgetary expenditures for 2003 will be mainly concentrated on education and public health, in compliance with the poverty reduction strategy the government signed in 2001 with the IMF and the World Bank. Economic growth is foreseen at around 7 per cent, and inflation is forecast to stay between 2 and 4 per cent.
Foreign Trade
For 2002, foreign trade deficit reached 24.6 percent of GDP. The rise of the foreign trade deficit is attributed to the higher growth of imports, as compared to exports. Albanian exports also grew to USD 330,2 mln. The exports are limited in producing raw materials, due to the lack of expansion of the processing capacities in the country. Albanian imports reached the volume of USD 1,5 million. Imports include consumer goods and machinery and equipment. The major foreign trade partners of Albania are Italy, Greece, Germany and France.
Privatisation
To stimulate economic growth, in 2003 Albania decided to privatise strategic sectors of the economy, areas that continue to be dominated by state ownership and control. The government drafted a schedule for an organised privatisation campaign, set to take place from June through October 2003. The privatisation of the Savings Bank, the telecommunication company Telecom, and the state insurance company INSIG by foreign strategic investors is already under way. The list of sectors and companies that the government put in its privatisation programme includes the energy corporation KESH, the General Directory of Railways, the Sea Port of Durres, the oil and gas sector, the coal mining and water supply sectors, and Albtransport. International financial institutions such as the World Bank and the IMF have continually encouraged privatisation of the strategic sectors. The IMF has made strategic privatisation a condition for signing an agreement with Albania next year. The European Bank for Reconstruction and Development (EBRD) is set to purchase a 20% share in INSIG. The level of foreign direct investment was 31 percent lower than 2001, amounting to USD 523 mln. The foreign investments are deterred by weak infrastructure, old technology, the fiscal burden (income taxes, value added tax and customs duties), weak implementation of legislation and insufficient financial services for the private sector. The major investing countries are Italy and Greece.