Economic
and Commercial Report, 2004 |
Poor
and backward by European standards, Albania is making the difficult transition
to a more modern open-market economy. The government has taken measures
to curb violent crime and to spur economic activity and trade. The economy
is bolstered by remittances from abroad of $400-$600 million annually,
mostly from Greece and Italy; this helps offset the sizable trade deficit.
Agriculture, which accounts for one-half of GDP, is held back because
of frequent drought and the need to modernize equipment and consolidate
small plots of land. Severe energy shortages and antiquated and inadequate
infrastructure make it difficult to attract and sustain foreign investment.
The government plans to boost energy imports to relieve the shortages
and is moving slowly to improve the poor national road and rail network,
a long-standing barrier to sustained economic growth. |
| ECONOMY
in figures |
| Indicators |
2004
(estimated) |
| Gross
domestic product (%) |
6 |
| Inflation
(%) |
3 |
| Unemployment
(%) |
16 |
| Export-USD
million |
380 |
| Import-USD
million |
1700 |
| Trade
balance-USD million |
-1320 |
|
| EBRD
Report Ranks Albania Among Europe's Poorest Countries |
Albania
was ranked again among Europe's poorest countries, due to high level of
corruption, organized crime, poor implementation of laws, weak administration,
external and domestic debts and low level of foreign investments, according
to the latest report of the European Bank for Reconstruction and Development
(EBRD). While the Albanian government and other foreign institutions have
often appraised the country's constant economic growth, EBRD's report
ranks Albania among Europe's poorest countries. "Despite the quick
economic growth recorded during the last few years, the per capita income
of $1,800 is among the lowest in Europe," the report emphasized.
About one-fourth of the population lives under the poverty limit of $2
per day. According to the report, the domestic and external debts constitute
another problem to Albania's economy. While the external debt was reduced
by about 23per cent of the Gross Domestic Product (GDP), the domestic
debt is actually at 38 per cent of the GDP. |
| FAO
Report on Albania |
The
Food and Agriculture Organization (FAO) in its annual report to the United
Nations Organization, raises alarm regarding the level of poverty in Albania.
The UN organization says that Albania needs EUR 17 billion in foreign
investments to overcome poverty until 2015. According to FAO's report,
Albanians continue to be the poorest of Europe, with 25 per cent of the
population (700,000 persons) having an economic standard below the level
of absolute poverty. The report says that nearly half of Albania's population
(1.5 million inhabitants) live on 1.6 euro per day, while 4.7 per cent
have a living standard below the extreme poverty level. |
| Liquefied
Gas Duties removed |
Albanian
government approved the removal of custom from liquid gas and its by-products,
which leads to a reduction of respective cost and price of liquid gas
in Albanian market. This step would also create operational facilities
in the customs check-points for the importing companies that provide the
liquid gas supply in the local market. Liquid gas sales have marked a
growing trend in Albania over the last five years. Specifically, the volume
of sales increased from around 9,000 tons back in 1999 to around 15,000
tons in 2000, 25,000 tons in 2001, 33,000 tons in 2002 and 42,000 tons
in 2003. |
| VAT
Reduction for Food Industry |
The
Value Added Tax (VAT) on food industry will drop from 20 % to 12-13 %.
This measure will create tax facilities for local companies operating
in milk processing, wine, olive oil and flour production sectors. Also,
Albanian consumers could directly benefit from this amendment as the reduction
of the VAT would be most likely reflected on dropping prices for the consumer's
goods, like bread, dairy products, etc. He commented that local farmers
were to benefit, too, as they could thus have higher access with their
products to the food processing industry. This measure will directly help
development of national production and poverty reduction in the country,
considering that an important part of an average Albanian family's budget
goes for buying foods. |
| Government
strategy in mining sector |
Starting
from 2005, Albanian government will implement a 15-year development strategy
for the mining sector, stated the Ministry of Industry and Energy. Meantime,
private companies reportedly invested a total USD 1.7 million amount in
this sector during the first quarter of 2004. Private investments reached
last year around USD 13 million in Albanian mining sector with a growth
by 30% from 2002. |
| USD
10 million Credit Agreement with IDA |
The
Albanian government approved a USD 10 million credit agreement with the
International Development Agency (IDA) for implementation of the third
phase of the Economic Development and Poverty Reduction National Strategy.
|
| The
credit will be used for: |
| promotion
of a stable economic development of the private sector; |
consolidation
of monitoring and assessing competencies of the policies agenda; |
improvement
of services distribution and efficiency of the insurance's network; |
improvement
of the essential functions of the public sector and of the institutional
regulations. |
After
the first two phases of the IDA credit for the Economic Development and
Poverty Reduction National Strategy, the Albanian government has approved
the Letter of intent for a third credit. The afore mentioned agreement
represents also a first step in the implementation of a complex project
for the urban development and tourism promotion along the Albanian coastal
area. The first phase of the project is expected to cost USD 15 million
and will include the south coast. The project focuses also on the tourism
development plans adopted by local communities and administrations, regarding
absorption of revenues, infrastructure investment plans, environment protection,
private sector investments. |
| Albania,
IMF Agree on 2004/2005 Economic Program |
Albanian
government and the International Monetary Fund (IMF) have agreed on a
nine-month program that aims to boost the economy of the impoverished
country. The program aims at taking full advantage of the relatively favorable
macroeconomic environment to accelerate social-economic development and
poverty reduction in Albania. For 2004, Albania forecasts economic growth
of about 6.0 percent, and inflation rate below 4.0 percent. |
| Albania
Included in the U.S. Loan List |
The
United States have lately classified Albania among the countries that
could benefit from the Millennium Target Account, worth an overall USD
1 billion budget for the ongoing 2004. The Board of Directors of this
new governmental agency has approved a list of 63 countries that will
compete in order to benefit from the U.S. financing. These loans will
be mostly aimed at reducing poverty through economic growth programs.
The above list involves those countries with an average annual income
per capita at around $1,415. |
| Foreign
investment |
Foreign
direct investments marked a decline for the first quarter this year compared
with the same period of 2003. Foreign direct investments were estimated
at around $35 million during January-March 2004 period, when this indicator
reached around $38 million for the first quarter last year. Foreign direct
investments totalled nearly $178 million in 2003 with a relevant 32 %
growth from 2002. |
| USD
410 million Foreign Investments in Albanian Oil Industry |
Foreign
companies have invested a total amount of nearly $ 410 million in Albanian
oil market over the last 13 years. During 2004, foreign companies invested
around $50 million in this sector. Fruitful results are expected to be
yielded from drilling of new oil-wells in Kanina (Vlora) by OMV and "Hellenic
Petroleum" companies as well as the one in Shpiragu, Berat, by "Occidental
Albania" company. |
| OMV
Invests $20m for Oil Drilling in Southern Albania |
Since
March, Austria's OMV has started drilling for oil in southern Albania.
The company has so far invested between $18-20 million to drill the Kanina
well to a depth of 5,500 meters. Albania's state budget revenue is estimated
to increase by around $70-100 million annually as surveys show potential
for oil and gas. In a joint venture with "Lundin Petroleum"
company, OMV will also start offshore oil and gas researches in Albania.
The Minister of Industry and Energy, Viktor Doda, signed an accord for
this purpose with OMV and "Lundin Petroleum". The two companies
would spend a total of $ 10 million to drill for oil and natural gas in
a marine area called the "Durres block" in western Albania. |
| Fifth
Japanese Agricultural Grant |
A
fifth Japanese grant for Albanian agriculture totalling $1.5 million was
granted. This includes 300 tractors, 550 farm machines and 6,500 tons
of chemical fertilizers which were distributed among Albanian farmers.
The fifth grant comes following the implementation of four other grants,
worth an overall $12.5 million value, earmarked so far by Japanese government
for Albanian agricultural sector. |
| Foreign
Trade |
In
the second quarter of 2004 export and import rose compared with the first
quarter of 2004. Export increased from USD 149 mln to USD 166 mln (11.5%)
and import increased from USD 517 mln to USD 599.6 mln (16%). Trade deficit
for this quarter is USD 433.4 mln signing an increase of 17.8% comparing
with the previous quarter. Trade with the EU countries is 75.1%. The main
trade partners for this quarter remain Italy and Greece. Export to Italy
is 75.2% and import 34.8%. While the export to Greece is 10.3% and import
19.3%. |
| Free
Trade Agreement with EU |
The
cost of implementation of the Free Trade agreement (FTA) between Albania
and European Union has been calculated to be USD 15 million due to lower
customs duties for goods imported from the EU. The Free Trade Agreement
between Albania and the European Union foresees a 20 per cent cut in the
customs duty for industrial products. Considering that the FTA with the
EU will be enforced in 2005, a 20 per cent cut in the customs administration
expenditure is expected next year. Besides the customs duty reduction
for industrial products, it is expected that a reduction of 10 per cent
be applied also for EU processed agricultural products. The loss in the
Albanian state budget is calculated only for the first year of the enforcement
of FTA with EU and correspond only to a first phase of customs duty reduction.
In the following phases, the tariff reductions will be higher with a major
influence in the state budget. |
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