Albania Country Report - December, 2016

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Albania Country Report - December, 2016

This report covers the key macroeconomic and financial releases as well as the political events from Albania for the period of December 13, 2016 – January 11, 2017.

World Bank says Albanian economy to expand by 3.5% in 2017, 2018
Albania amends TAP gas pipeline deal to increase financial benefits
EC pays out €13mn to Albania for public administration, employment, reforms
Albanian parliament adopts 2017 state budget, deficit at 2% of GDP
Two MPs among first victims of Albania's decriminalisation law
Albania’s Constitutional Court rejects opposition request to revoke vetting law
Albanian justice minister urges French peer not to extradite Haradinaj
IMF ready to discuss new deal with Albania following June election


Key points:
• Albania's inflation accelerates in December 2016, but stays below target
• Albania’s public debt reaches €7.84bn at end-September
• Tourism revenues jump 25% in Q3
• 11-mo trade gap widens 13.4% y/y
• Albania’s Q3 public sector average wage up 1% y/y
• Number of building permits issued in Albania jumps in Q3



Table of Contents

1. Executive Summary 4
1. Politics 5
Macedonia’s ethnic Albanian parties set conditions for joining new government 5
Albanian justice minister urges French peer not to extradite Haradinaj 6
Albania’s Constitutional Court rejects opposition request to revoke vetting law 7
Two MPs among first victims of Albania's decriminalisation law 7
Albanian PM Rama expects second mandate in 2017 election 8
Albania prepares second package of judicial laws 8
2. Macroeconomic overview 9
World Bank says Albanian economy to expand by 3.5% in 2017, 2018 9
IMF ready to discuss new deal with Albania following June election 9
Albanian central bank keeps key rate at 1.25% 10
EC pays out €13mn to Albania for public administration, employment reforms 10
Quarter of Albanians positive about economic situation 11
4. Real Sector 12
4.1. GDP 12
Albanian economy expands by real 2.59% in 2015 – preliminary data 12
4.2 Inflation 12
Albania's inflation accelerates in December 2016, but stays below target 12
4.2.2 Producer price index 14
Albania's producer price deflation eases to 2% y/y in Q2 14
4.3 Industry and trade 14
4.3.1 Industry 14
Albania's economic activity index speeds up y/y in Q3 14
4.3.2 Construction 15
Number of building permits issued in Albania jumps in Q3 15
4.4 Investments 15
Albania’s negative NIIP expands 4.4% in Q3 2016 15
4.5. Labour and retail 15
4.5.1 Unemployment and wages 15
Albania’s Q3 public sector average wage up 1% y/y 15
Albania's registered jobless rate falls further in Q3 16
4.5.2 Retail 16
Albania's retail sales growth speeds up to 6.5% y/y in Q3 2016 16
5. External sector and trade 17
5.1 Balance of payment and current account 17
Albania's Q3 current account gap falls 33.5% y/y 17
5.2 Trade 17
Albania’s 11-mo trade gap widens 13.4% y/y 17
5.3 Foreign direct investments (FDI) 18
Albania’s 9-mo FDI down 3% y/y 18
5.4 External debt 19
Growth of Albania’s gross external debt slows to 6.5% y/y at end Q3 19
5.5 Foreign reserves 19
Albania’s reserve assets fall 2% y/y at end-November 19
6. Public sector 20
6.1 Budget 20
Albania posts budget surplus of €52.2mn in January-November 2016 20
Albanian parliament adopts 2017 state budget, deficit at 2% of GDP 21
6.2 Government debt 21
Albania’s public debt reaches €7.84bn at end-September 22
7. Foreign exchange 22
Albanian lek falls again against euro in December 22
8. Financial sector and capital markets 23
8.1 Banking system 23
Albania's bad loan ratio still above 20% in November 23
Albania's commercial bank deposits up 2.1% in October 24
Growth of Albanian banks’ loan portfolios accelerates slightly in November 24
8.2 Interest rate and bond market 25
Albania raises €18.9mn in 10-year T-bonds in first auction in 2017 25
Albania sells €62.9mn in government papers, target missed 26
8.3 Money supply 26
Albania's M3 money supply up 3% y/y in November 26
8.4 Credit rating 26
S&P rates Albania at 'B+/B' 26
9. Industry and sector news 26
Albania’s 11-month exports of footwear higher by 20% 27
Electricity prices for businesses in Albania to increase due to new distribution fees 27
Albanian insurance market up 7.8% y/y in Jan-Nov 28
Albania amends TAP gas pipeline deal to increase financial benefits 28
Tourism revenues in Albania jump 25% in Q3 29
Albanian central bank to set up mechanism to prevent banks’ bankruptcy 29
Albania signs financing deal with KfW for waste management project in Vlore 30
10. Major Corporate News 30
Claims of creditors of Albania’s bankrupt steel producer Kurum estimated at €230mn 30

Number of pages: 31
Release Date: Wed, 11 Jan 2017