Albania Country Report - July , 2014

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Albania Country Report - July , 2014

This report covers the main macroeconomic releases from July 7 to August 5 as well as the financial and political events that took place in Albania during this period.
A few months after the International Monetary Fund (IMF) agreed to provide Albania with a EUR 331mn credit to support the authorities’ reform programme, the fund said it expects the country’s economic growth to accelerate in the second half of the year supported by external drivers and a modest recovery in domestic demand. In the first review of the country’s economic performance under the credit arrangement, the IMF said it sees Albania’s real GDP growth at 2% in 2014 and rebounding to 4.2% in the mid-term driven by structural reforms that improve the business climate and raise potential growth, a gradual recovery in European partner economies and large energy-related investments.
According to the latest data from the statistics office, Albania’s economy expanded by 1.8% in the first quarter of 2014, easing from a 2.2% hike in the previous quarter. In quarterly comparison, the growth rate also slowed down to 0.2% in Q1 from 0.7% in Q4.
In the meantime, London-based Business Monitor International, part of Fitch Group, said in a new forecast it sees Albania’s GDP growing 1.8% y/y in 2014, speeding up from 0.7% y/y in 2013.
After in June Albania won the long-desired status of EU candidate country, the OSCE said the country needs to ensure constructive political environment in order to start talks for EU membership. The political parties should go beyond the great political divisions in order to establish the consensus for the sustainable solution of problems the country is facing.
Key points:
• Albania’s consumer prices increased by 1.5% y/y in June, slowing down for the third month in a row and easing from a 1.6% y/y growth in May.
• The general budget deficit narrowed by 54% y/y to ALL 22.2bn in the first half of 2014 and equalled to 1.6% of the full-year GDP forecast.
• The country’s foreign trade deficit widened by 6.7% y/y to ALL 101.6bn in January-May 2014. The gap accounted for 7.3% of the projected full-year GDP, up from 7.1% of GDP a year earlier.


Table of Contents

EXECUTIVE SUMMARY 3
MACROECONOMIC OVERVIEW 5
IMF sees Albania’s economic growth accelerating in H2 5
BMI sees Albania’s 2014 economic growth at 1.8% 5
C-bank sells EUR 32.2mn in 10-year bonds, yields drop. 5
C-bank cuts offer at 2-year bond auction on weak demand 6
Govt prepares for second Eurobond issue - finance minister 6
Central bank keeps key rate flat at 2.50% 7
Economic sentiment indicator rises further in Q2 2014 7
Govt plans to raise retirement age for women to 63 in 2023 8
Govt approves 2% pension hike 8
Foreign tourist arrivals rise 26.9% y/y in Q1 2014 8
REAL SECTOR 9
1. GDP 9
Albania's economic growth eases to 1.6% y/y in Q1 2014 9
2. Inflation 11
CPI inflation eases further to 1.5% y/y in June 2014. 11
FISCAL SECTOR 12
General budget deficit narrows 54% y/y in H1 2014 12
FINANCIAL SECTOR 13
Growth in bank assets speeds up to 4.6% y/y at end-June 2014. 14
Bank lending falls 1.6% y/y in June 2014 14
Insurers’ gross premiums up 34.7% in H1 14
Net assets of Albanian voluntary pension funds rise 22.8% ytd at end-June 2014 15
EXTERNAL SECTOR 16
Balance of payments 16
Foreign trade deficit deficit widens 10.4% y/y in H1 16
PRIVATISATION AND INDUSTRY NEWS 18
Govt plans measures for energy market liberalisation in 2015 18
Energy ministry to revoke 30 licences for small hydropower concessions 18
Mobile regulator calls 4G tender 18
POLITICS 18
OSCE says Albania needs constructive political dialogue to start EU membership talks 18

Table 1 GDP breakdown 9
Table 2 CPI Inflation 11
Table 3 General budget balance 12
Table 4 Insurance premiums 15
Table 5 Foreign trade 17

Figure 1 Yields on 2-year bonds 6
Figure 2 CPI inflation 11
Figure 3 Bank assets 14
Figure 4 Bank loans 14
Figure 5 Foreign trade 17

Number of pages: 19
Release Date: Tue, 05 Aug 2014