News 06 Oct 14
Albania’s GDP fell by 0.6 per cent in the second quarter of 2014, the National Institute of Statistics said, frustrating government expectations of higher growth.
The National Institute of Statistics, INSTAT, said on Monday that the slump in the economy during the period was due to the poor performance of the construction and industrial sectors, although other parts of the economy fared better.
The construction sector posted a 2.8 per cent contraction due to smaller government investments for public works compared to the previous year, when Albania held general elections and public expenditures on major infrastructural projects were high.
Industrial production also contracted by 1.3 per cent as result of lower electricity production from major hydropower plants.
Electricity production fell by almost 30 per cent as a result of natural fluctuations in river flows. As result of lower electricity production this year, the government had to subsidise imports of electricity.
The rest of economy fared better, with manufacturing growing by six per cent while the trade and hospitality sector grew by seven per cent.
The government and the International Monetary Fund earlier this year forecasted GDP growth of 2.1 per cent for 2014, but the latest data suggests that overall growth for this year might be much lower than expected.
Lower economic growth has not caused major problems for government finances, which have performed well this year, but the government has faced difficulties in reaching an agreement with the International Monetary Fund for the next year’s fiscal plan.
Under a three year agreement between Albania and the IMF, Tirana has to cut its overall public debt by an equivalent of three per cent of GDP per year starting from 2016. However, according to experts, the debt reduction could only be achieved if economic growth returns to three or more per cent per year.