This report covers the main macroeconomic releases from June 5 to July 7 as well as the financial and political events that took place in Albania during this period.
Last month Albania scored a big victory after the EU Council granted it EU candidate status clearing the first hurdle on its route to full membership. Albania has failed to win the desired status three times since 2009. However, before formal membership talks begin the government in Tirana should do more to tackle corruption and organised crime, the Council said.
A few weeks before the June 29 meeting of EU heads at which Albania officially became EU candidate country, the Czech Republic warned that it will vote against such a decision unless Tirana settles its dispute with Czech power group CEZ, something which Albania eventually did days before the meeting.
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 completed the first review of the country’s economic performance under the loan deal and approved the disbursement of the second tranche of SDR 23.55mn (EUR 26.7mn) tranche. The first tranche of SDR 23.55mn was disbursed after the IMF board approved the loan on February 28.
In the meantime, Oxford Economics said in a new forecast that it keeps unchanged the country’s economic growth estimate at 1.9% for this year. The global researcher warned that domestic demand will be constrained by poor credit conditions and weak balance sheets in the financial sector, while narrowing current account deficit, a gradually improving European economy and some progress on structural reforms will provide positive momentum for Albania.
According to London-based Business Monitor International, weak household consumption will also weigh on Albania’s economic recovery.
Key points:
• Albania’s consumer prices increased by 1.6% y/y in May 2014, slowing down for a second month in a row from the 1.7% y/y growth in April and the nine-month high of 2.2% y/y in March. Producer prices edged down by 0.5% y/y in the first quarter of the year, reversing a 0.1% hike in the previous three months.
• The current account deficit widened 30.4% y/y to EUR 300mn in the first quarter of 2014, equalling to 3% of the full-year GDP projection. The foreign trade deficit widened by 6.7% y/y to Q1 accounting for 7.3% of the full-year GDP, up from 7.1% a year ago.
• The unemployment rate (age 15 and more) rose by 3.3pps y/y to 17.7% in the first quarter of 2014 on shrinking employment numbers.