Albania Country Report - August, 2016

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Albania Country Report - August, 2016

This report covers the key macroeconomic and financial releases as well as the political events from Albania for the period of August 13, 2016 – September 12, 2016.
Albania vulnerable to corruption amid lack of independent monitoring institutions
IMF to disburse €35.9mn to Albania under EFF
Albania ready to ask for launch of EU accession talks
Parliament in Tirana adopts first crucial justice reform law
Montenegro, Albania and Croatia sign MoU on Ionian-Adriatic gas project
Bankers Petroleum's crude deal to revive Albanian oil refining sector
Audit find in favour of Bankers Petroleum in tax dispute with Albanian government
Key points:
• Inflation speeds slightly to 2% in August
• Albania continues posting budget surplus through July
• Albania’s 7-mo trade gap widens 19.7% y/y
• NPL ratio back up to mid-2015 level
• Public debt rises at end-June
• Jobless rate falls to 15.5% in Q2

Table of Contents

1. Executive Summary 4
2. Politics 5
Albania vulnerable to corruption amid lack of independent monitoring institutions, Transparency International says 5
Albania ready to ask for launch of EU accession talks 6
Albanian parliament adopts first crucial justice reform law 6
Albanian judicial reforms reportedly to cost mn per year 7
3. Macroeconomic overview 8
IMF to disburse €35.9mn to Albania under EFF 8
4. Real Sector 8
4.1. GDP 8
Albania’s economic growth expected to rise over 4% over medium term 8
4.2 Inflation 9
Albania's inflation speeds slightly to 2% y/y in August 9
Albania's producer price deflation eases to 2% y/y in Q2 10
4.2.3 Construction cost index 11
Albania's construction cost index down 0.2% y/y in Q2 11
4.3 Industry and services 11
4.3.1 Energy production 12
Albania’s net power output up 8.2% y/y in H1 12
4.3.2 Construction 12
Developments in the construction sector remained on the up side in Q1 2016 12
4.4 Investments 13
The dynamics of investments continued to trend upward in Q1 2016 13
4.5. Labour and retail 13
4.5.1 Unemployment and wages 13
Albania's jobless rate falls to 15.5% in Q2 - labour force survey 13
4.5.2 Retail 14
Albania's overall retail sales rose by 4.7% y/y in the first quarter of 2016, 14
5. External sector and trade 14
5.1 Balance of payment and current account 15
Albania’s current account gap totaled €258mn in Q1 15
5.2 Trade 15
Albania’s 7-mo trade gap widens 19.7% y/y 15
Albania’s IPI drops 1.7% y/y in Q2 16
5.3 Foreign direct investments 17
Albania’s FDI falls to €152mn in Q1 17
5.4 External debt 17
Albania’s gross external debt position was €7,735mn in Q1 17
5.5 Foreign reserves 17
Albania’s reserve assets totaled €2.807bn at end-July 17
6. Public sector 17
6.1 Budget 17
Albania continues posting budget surplus through July 17
6.2 Government debt 18
Albania’s public debt rises at end-June 18
7. Foreign exchange 19
Albanian lek remains stable against euro 19
8. Financial sector and capital markets 19
8.1 Banking system 19
Albania's NPL ratio back up to mid-2015 level 19
Albania's average interest rate on new loans keeps falling y/y in July 20
Albania's average interest rate on lek deposits down y/y in July 20
Loan portfolio of Albania's commercial banks edges down 0.3% y/y in July 21
Growth of Albania's commercial bank deposits speeds up in July 21
Albanian central bank to introduce new regulations for SLAs 22
8.2 Interest rate and bond market 23
Albania raises €26.5mn in two-year T-bonds 23
8.3 Money supply 23
Albania's M3 money supply up 1.3% y/y at end-July 23
8.3 Credit rating 24
S&P rates Albania at 'B+/B' 24
9. Industry and sector news 24
Runner up gets Albanian motorway concession after crying foul over corruption 24
EU Energy Community says Albania makes progress towards CESEC targets 25
73 new HPPs under construction in Albania 26
Montenegro, Albania and Croatia sign MoU on Ionian-Adriatic gas project 27
Albania’s imports of oil up by 20% y/y in January-July 27
Albanian imports of iron/steel from Germany rise following Kurum’s bankruptcy 28
Albania’s insurance market up 3% y/y in January-July 28
Albania’s voluntary pension funds’ net assets up 19.7% from end-2015 at end-June 29
Foreign visitors in Albania up 24.3% y/y this summer 29
Net profit of Albanian insurance market down 20.3% y/y in 2015 30
Number of active mobile users in Albania rises slightly y/y at end-Q2 30
10. Major Corporate News 31
Chinese authorities approve Geo-Jade's acquisition of Bankers Petroleum 31
Nord Pool interested in planned Albanian electricity exchange 31
Bankers Petroleum's crude deal to revive Albanian oil refining sector 32
Sun&Wind Energy Corporation applies for renewable energy projects in Albania 32
Audit finds in favour of Bankers Petroleum in tax dispute with Albanian government 33
EBRD to provide unfunded risk sharing instrument to Societe Generale Albania 34

Number of pages: 34
Release Date: Mon, 12 Sep 2016