Economy of Albania

Economy of Albania
Bank of Albania
Rank	115th (est.2010)
Currency	Lek (ALL)
Fiscal year	Calendar year
Trade organisations	WTO, BSEC
Statistics
GDP	$12.39 billion (2012, nominal)
GDP growth	0.5% (2012)
GDP per capita	$7,800 (PPP) (2011 est.)
GDP by sector	agriculture: 20.6%, industry: 19.9%, services: 59.5% (2008 est.)
Inflation (CPI)	3.4% (2010 est.)
Population below poverty line	13% (2012)
Gini coefficient	34.5 (2008)
Labour force	1.09 million (2006 est.)
Labour force by occupation	Agriculture 58%, Industry 15%, Services 27% (September 2006 est.)
Unemployment	12.5% official rate, but may exceed 30% due to preponderance of near-subsistence farming (2008 est.)
Average gross salary	246 € / 332 $, monthly (2010)
Main industries	Food processing, textiles and clothing; lumber, oil, cement, chemicals, mining, basic metals, hydropower, tourism
Ease of Doing Business Rank	82nd
External
Exports	$1.886 billion (2011 est)
Export goods	textiles and footwear; asphalt, metals and metallic ores, crude oil; vegetables, fruits, tobacco
Main export partners	Italy: 58.75% Greece: 9.69% Austria: 6.73% China: 5.68% (2009)
Imports	$5.022 billion (2011 est.)
Import goods	machinery and equipment, foodstuffs, textiles, chemicals, etc.
Main import partners	Italy: 29.94% Greece: 14.05% Turkey: 7.1% Germany: 6.9% China: 5.39% (2009)
Public finances
Public debt	$5.7 billion (2011 est)
Revenues	$3.40 billion (2011)
Expenses	$3.87 billion (2011)
Economic aid	recipient: ODA: $366 million (top donors were Italy, EU, Germany) (2003 est.)
Credit rating	B+ (Domestic) B+ (Foreign) BB- (T&C Assessment) (Standard & Poor's)
Foreign reserves	$2.34 billion (December 2012)
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars

The economy of Albania has undergone a transition from its communist past into an open-market economy in the early 1990s. Although the country is rich in natural resources, the economy is mainly bolstered by agriculture, food processing, lumber, oil, cement, chemicals, mining, basic metals, hydropower, tourism, textile industry, migrant remittances, and the informal economy.

History

The collapse of communism in Albania came later and was more chaotic than in other Eastern European countries and was marked by a mass exodus of refugees to Italy and Greece in 1991 and 1992. The country attempted to transition to autarky, but this eventually failed. Attempts at reform began in earnest in early 1992 after real GDP fell by more than 50% from its peak in 1989. Albania currently suffers from high organised crime and corruption rates.

The democratically elected government that assumed office in April 1992 launched an ambitious economic reform program to halt economic deterioration and put the country on the path toward a market economy. Key elements included price and exchange system liberalization, fiscal consolidation, monetary restraint, and a firm income policy. These were complemented by a comprehensive package of structural reforms including privatization, enterprise, and financial sector reform, and creation of the legal framework for a market economy and private sector activity. Most agriculture, state housing, and small industry were privatized. This trend continued with the privatization of transport, services, and small and medium-sized enterprises. In 1995, the government began privatizing large state enterprises. After reaching a low point in the early 1990s, the economy slowly expanded again, reaching its 1989 level by the end of the decade.

Macro-economic trends

This is a chart of Gross Domestic Product (GDP) of Albania in national currency (million leks) and in US dollars based on Purchasing Power Parity (PPP) from estimates by the International Monetary Fund.

Year	GDP, million leks	GDP, million US$–PPP	US$ exchange rate, leks/$	Inflation index (2000=100)
1980	17,411	4,836	9.49	5.10
1985	18,896	6,891	8.58	5.10
1990	18,840	8,233	9.01	5.10
1995	251,843	8,108	92.79	55
2000	530,906	11,483	143.68	100
2005	836,833	16,944	100.19	121
2007	982,179	18,818	103.34	124

For purchasing power parity comparisons, the US dollar is exchanged at 49 leks (2007 estimate). Mean wages were $3.83 per manhour in 2009.

Albania is a middle income country by Western European standards, with GDP per capita greater than the several countries in the region. . According to Eurostat, Albania's GDP per capita (expressed in PPS – Purchasing Power Standards) stood at 35 percent of the EU average in 2008. Unemployment rate of 13.3% is considerably lower than many countries in Balkans, For Example, Serbia has an un employment rate of 24%.

Results of Albania's efforts were initially encouraging. Led by the agricultural sector, real GDP grew by an estimated 11% in 1993, 8% in 1994, and more than 8% in 1995, with most of this growth in the private sector. Annual inflation dropped from 25% in 1991 to single-digit numbers. The Albanian currency, the lek, stabilized. Albania became less dependent on food aid. The speed and vigour of private entrepreneurial response to Albania's opening and liberalizing was better than expected. Beginning in 1995, however, progress stalled, with negligible GDP growth in 1996 and a 9% contraction in 1997. A weakening of government resolve to maintain stabilization policies in the election year of 1996 contributed to renewal of inflationary pressures, spurred by the budget deficit which exceeded 12%. Inflation approached 20% in 1996 and 50% in 1997. The collapse of financial pyramid schemes in early 1997 – which had attracted deposits from a substantial portion of Albania's population – triggered severe social unrest which led to more than 1,500 deaths, widespread destruction of property, and an 8% drop in GDP. The lek initially lost up to half of its value during the 1997 crisis, before rebounding to its January 1998 level of 143 to the dollar. The new government, installed in July 1997, has taken strong measures to restore public order and to revive economic activity and trade.

Albania is currently undergoing an intensive macroeconomic restructuring regime with the International Monetary Fund and the World Bank. The need for reform is profound, encompassing all sectors of the economy. In 2000, the oldest commercial bank, Banka Kombetare Tregtare/BKT was privatized. In 2004, the largest commercial bank in Albania—then the Savings Bank of Albania—was privatised and sold to Raiffeisen Bank of Austria for US$ 124 million. Lagging behind its Balkan neighbors, Albania is making the difficult transition to a more modern open-market economy. Macroeconomic growth has averaged around 5% over the last five years and inflation is low and stable. The government has taken measures to curb violent crime, and recently adopted a fiscal reform package aimed at reducing the large gray economy and attracting foreign investment. The economy is bolstered by annual remittances from abroad representing about 15% of GDP, mostly from Albanians residing in Greece and Italy; this helps offset the towering trade deficit. The agricultural sector, which accounts for over half of employment but only about one-fifth of GDP, is limited primarily to small family operations and subsistence farming because of lack of modern equipment, unclear property rights, and the prevalence of small, inefficient plots of land. Energy shortages because of a reliance on hydropower, and antiquated and inadequate infrastructure contribute to Albania's poor business environment and lack of success in attracting new foreign investment. The completion of a new thermal power plant near Vlore has helped diversify generation capacity, and plans to improve transmission lines between Albania and Montenegro and Kosovo would help relieve the energy shortages. Also, with help from EU funds, the government is taking steps to improve the poor national road and rail network, a long-standing barrier to sustained economic growth.

Reforms have been taken especially since 2005. In 2009, Albania was the only country in Europe, together with San Marino and Liechtenstein, to have economic growth; Albanian GDP real growth was 3.7%. Year after year, the tourism sector has gained a growing share in the country's GDP.

Data published as of July 2012 by the National Institute of Statistics, INSTAT, show the economy contracted by 0.2 per cent in the first quarter of the year - a downturn blamed mainly on the eurozone debt crisis.

External trade

Albanian exports in 2006

However, reforms are constrained by limited administrative capacity and low-income levels, which make the population particularly vulnerable to unemployment, price fluctuation, and other variables that negatively affect income. The economy continues to be bolstered by remittances of some 20% of the labour force that works abroad, mostly in Greece and Italy. These remittances supplement GDP and help offset the large foreign trade deficit. Most agricultural land was privatized in 1992, substantially improving peasant incomes. In 1998, Albania recovered the 8% drop in GDP of 1997 and pushed ahead by 7% in 1999. International aid has helped defray the high costs of receiving and returning refugees from the Kosovo conflict. Large-scale investment from outside is still hampered by poor infrastructure; lack of a fully functional banking system; untested or incompletely developed investment, tax, and contract laws; and an enduring mentality that discourages initiative.

Oil and gas

In early 2008, vast and untouched deposits of oil and gas were discovered in northern Albania. The deposits are estimated at a total of up to 2,987,000,000 barrels (474,900,000 m³) of oil and 3.014 trillion cubic feet of natural gas. The announcement was made by the corporation Gustavson Associates LLC, engaged by Manas Petroleum Corporation, which has a contract with the government of Albania to explore the northern parts of the country for oil and gas deposits.

Statistics

Macroeconomic indicators

GDP (PPP): $25.035 billion (2011)
country comparison to the world: 116

GDP per capita: $8,800 (2011)
country comparison to the world: 123

GDP - real growth rate: 3.5% (2011)
country comparison to the world: 109

Inflation: 3.5% (2010)
country comparison to the world: 114

Unemployment: 13.3% (2010 est)
country comparison to the world: 141

Industry

Industrial production growth rate: 3% (2010 est.)
country comparison to the world: 113

Agriculture

Products: wheat, maize, potatoes, vegetables, fruits, sugar beets, grapes; meat, dairy products

Foreign trade

Exports: $1.548 billion (2010 est.)
country comparison to the world: 142

Imports: $4.59 billion (2010 est.)
country comparison to the world: 120

Import partners: Italy 27.6%, Greece 14.8%, Turkey 7.4%, Germany 5.6%, Switzerland 5%, Russia 4.2% (2007)

Remittances: (from Italy, Greece and elsewhere) $800 million (2007 est.)

Current account balance: -$1.404 billion (2010 est.)
country comparison to the world: 152

Foreign exchange reserves: $2.479 billion (2008)
country comparison to the world: 103

Energy

Electricity – production: 5.201 billion kWh (2009)
country comparison to the world: 113

Electricity – production by source:

• fossil fuel: 2.9%
• hydro: 97.1%
• other: 0%
• nuclear: 0% (2007)

Electricity

• Consumption: 6.593 billion kWh (2009)

country comparison to the world: 102

• Exports: 0 kWh (2009)
• Imports: 1.884 billion kWh (2009 est.)

Oil

• production: 5,400 barrels per day (860 m³/d) (2009)

country comparison to the world: 94

• consumption: 36,000 barrels per day (5,700 m³/d) (2009)

country comparison to the world: 107

• exports: 748.9 barrels per day (119.07 m³/d) (2005 est.)
• imports: 24,080 barrels per day (3,828 m³/d) (2007 est.)
• proved reserves: 199,100,000 barrels (31,650,000 m³) (January 1, 2008)

Natural gas

• production: 30 million m³ (2006 est.)

country comparison to the world: 84

• consumption: 30 million m³ (2006 est.)

country comparison to the world: 108

• exports: 0 cu m (2007 est.)
• imports: 0 cu m (2007 est.)
• proved reserves: 849.5 million m³ (January 1, 2008 est.)

country comparison to the world: 100

Exchange rates

• Lekë per US dollar: 79.546 (2008), 92.668 (2007), 98.384 (2006), 102.649 (2005), 102.78 (2004), 121.863 (2003), 140.155 (2002), 143.485 (2001), 143.709 (2000), 137.691 (1999)

See also

• Agriculture in Albania
• Economy of Europe
• List of Albanian companies
• List of banks in Albania
• Banka Kombetare Tregtare

References

•  This article incorporates public domain material from the CIA World Factbook document "2006 edition".
• From 2003,  This article incorporates public domain material from websites or documents of the United States Department of State (Background Notes).
• From 2007, International Monetary Fund

Further reading

• Bitzenis, Aristidis, and Lelie T. Szamosi. "Entry Modes and the Determinants of Foreign Direct Investment in a European Union Accession Country: The Case of Albania." Journal of East-West Business 15, no.3-4 (2009): 189-209.
• Feilcke-Tiemann, Adelheid. "Albania: Gradual Consolidation limited by Internal Political Struggles". Southeast European and Black Sea Studies 6, no. 1 (2006):25-41.

External links

• Albic Business Web Portal in Albania
• Bank of Albania (official site)
• U.S. Department of Energy – Country Report on Albania
• BlejShqip.al - Buy Albanian Products Official Website
• Ministry of Finance of Albania Official Website
• Lawyers Property Albania ltd
• Comprehensive Balkanalysis.com 2012 report on Albania oil sector foreign investment
• Albania Business and Property Portal
• Banka Kombetare Tregtare / BKT
• Raiffeisen Bank Albania
• Ministry of Economy, Trade, and Energy of Albania Official Website