Intellinews - Albania Country Report - Sept 2012

Albania’s economy expanded by 2% y/y in the second quarter of 2012, reversing a 0.2% contraction in the first three months of the year, according to the latest data published by the country’s statistics office. In quarterly terms, the country’s GDP grew by 0.9% in Q2, following a 1.3% decline in Q1. Prior to publishing second-quarter GDP data, the government revised down its economic growth forecast for this year to 3% from earlier expected 4% reflecting lower than expected contribution of domestic demand, the underperformance of Albania’s exports as well as the weak credit market. Despite the downgrade, the authorities remain rather optimistic given the estimates of the IMF and the World Bank. They see Albania’s 2012 GDP growth at between 0.5% to 1%. At its latest quarterly report, Austria’s Raiffeisen kept unchanged Albania’s 2012 GDP growth forecast at 2%, the strongest annual rise in the SEE.

Albania slipped one place to rank 42nd out of 144 countries in the 2012 edition of Global Economic Freedom Ranking. The deterioration was mainly due to lower score achieved in legal system and property rights, which is one of the five broad areas comprising the overall index. After accelerating for six straight months, the annual consumer price inflation in the country eased to 2.6% in September from 2.8% in August mainly on the back of a slower rise in regulated prices.

Higher revenue and lower costs helped the government narrow the general budget deficit by 28.7% in the first eight months of 2012. The gap accounted for 1.6% of the projected full-year GDP, down from 2.4% a year earlier.

Albania’s foreign trade deficit declined by 6.2% in January to August 2012 and equalled to 15.1% of the projected full-year GDP, down from 16.8% a year earlier. The lower deficit was due to a 5.9% y/y rise in exports and a 1.7% y/y decline in imports.