Albania Country Report - March, 2014

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Albania Country Report - March, 2014

This report covers the main macroeconomic releases from March 5 to April 7, 2014 as well as the financial and political events that took place in Albania during this period.

A month after the International Monetary Fund (IMF) agreed to provide Albania with a EUR 331mn credit to support the authorities’ reform programme, the fund said that the country’s economy is showing signs of protracted weakness and widening macroeconomic imbalances. Weak investor confidence, bank risk aversion, as well as incomplete investment climate reforms, have amplified the slowdown, the IMF said. The fund estimates Albania’s GDP grew by just 0.7% in 2013 and sees the growth strengthening to 2.1% in 2014.

The IMF’s 2014 GDP growth estimate for Albania is in line with the latest forecast by Austria’s Raiffeisen International that sees the GDP up by a real 2%, speeding up from a 1.3% increase in 2013. Raiffeisen sees the country’s general budget deficit at 6.6% of GDP in 2014, widening from 6% of GDP in 2013. In the first two months of 2014 the budget deficit narrowed by 82.3% and equalled to 0.1% of the projected full-year GDP.

The country’s gross external debt edged up by 0.5% quarter on quarter to EUR 5.7bn as of end-2013, accounting for 58.3% of the GDP. The foreign trade gap expanded by 6.8% year on year in January-February and accounted for 2.6% of the full-year GDP forecast. The current account gap also widened – by 5% year on year to 10.7% of the GDP.

Consumer prices inflation in the country quickened to 1.9% in February from 1.7% in January with the overall trend was again determined by food prices, which grew 2.9% year on year accelerating from 2.7% the month before. Producer prices picked up by 0.1% year on year in Q4, the same as in the previous three months.


Table of Contents

EXECUTIVE SUMMARY 4
MACROECONOMIC OVERVIEW 5
Raiffeisen keeps Albania’s 2014 GDP growth forecast at 2%. 5
IMF says Albania's economy shows signs of protracted weakness, widening macroeconomic imbalances. 6
Albania expects USD 200mn financing from World Bank in May – finance minister. 6
Central bank keeps key rate at record-low of 2.75%. 7
REAL SECTOR 8
1. Inflation 9
CPI inflation speeds up to 1.9% y/y in February 2014. 9
Producer price index edges up 0.1% y/y in Q4 2013. 11
2. Labour market 11
Unemployment rate rises 2.6pps y/y to 17% in Q4 2013 12
3. Industry and trade 12
Industrial sales rise 3.3% y/y in Q4 2013.. 12
Retail sales growth eases to 0.5% y/y in Q4 2013. 12
FISCAL SECTOR 13
General budget deficit narrows 82.3% y/y in Jan-Feb 2014. 13
FINANCIAL SECTOR 14
Bank assets assets rise 5.4% y/y at end-January 2014. 14
Insurers’ gross premiums rise 29.1% in Jan-Feb 2014. 16
IMF sees increased vulnerability to shocks of Albanian banking sector. 18
EXTERNAL SECTOR 18
Balance of payments 18
Foreign trade gap widens 6.8% y/y in Jan-Feb 2014. 19
Foreign debt edges up 0.5% q/q in Q4 2013. 20
Current account deficit widens 5% y/y in 2013. 20
PRIVATISATION AND INDUSTRY NEWS 21
Arian Resources raises USD 2.8mn in private placement to fund Albanian operations. 23
Albania plans ambitious reforms in energy sector. 23
Albania wants Petromanas to pay USD 5.4mn compensations for operations delay.. 23
POLITICS 24
EU encourages further reforms in Albania. 24

Table 1 CPI 9
Table 2 Producer price index 11
Table 3 Retail sales 13
Table 4 Budget balance 14
Table 5 Insurance premiums 16
Table 6 Foreign trade 19
Table 7 Current account 21

Figure 1 Yields on two-year bonds 8
Figure 2 CPI 9
Figure 3 Bank assets 14
Figure 4 Bank loans 16
Figure 5 Foreign trade 19

Number of pages: 24
Release Date: Mon, 07 Apr 2014