Page 25 - SE Outlook Regions 2022

Official FX reserves ($ bn) 2.9 3.3 3.5 4.3 5.1

EUR/LC (avg) 137 134 128 123 123

Source: World Bank, Bank of Albania, IMF, Instat

2.1.1 GDP growth

Albania achieved robust GDP growth during 2021 as the economy
recovered from the coronacrisis, and this is expected to continue in
2022 though risks remain, not least the spread of new variants of the
virus, and a potentially long-lasting energy price hike, which would push
up prices of electricity imports.

Albania’s 2022 budget is based on projected GDP growth of 4.1% for
the year, slightly higher than the forecasts from intentional financial
institutions.

In late 2021, the European Bank for Reconstruction and Development
(EBRD) made a strong upward revision to its 2021 growth forecast for
Albania, lifting it to 8.0% – 3.5 percentage points (pp) up compared to
its previous forecast made in June. At the same time, however, the
EBRD lowered its forecast for Albania’s 2022 growth by 0.3 pp to 3.7%.

The European Commission also lifted its 2021 forecast to 6.9% – a
significant upgrade from the 4.1% it projected in June — and said
growth is expected to remain strong at 3.7% in 2022 and 3.6% in 2023,
supported by the expected full recovery of tourism and manufacturing
to pre-crisis levels.

The World Bank, meanwhile, has upped its 2022 growth forecast by
0.1pp to 3.8% in 2022, and GDP is projected to grow by 3.7% in 2023.

According to the latest data released by the statistics office, Instat,
Albania’s year-on-year GDP growth moderated to 7.0% in the third
quarter of 2021. The drop in the y/y figure from 17.9% in Q2 reflects the
extraordinary base effect of the lockdown in the second quarter of 2020,
followed by a revival of economic activity in the third quarter of the year.
While Albania’s economy has continued to be affected by the pandemic
since then, it has not seen another large-scale shutdown of economic
activity.

By sector, the biggest contrition to the y/y increase in GDP in Q3 came
from trade, transport, accommodation and food services, which
increased by 13.76% to add +2.41 pp to the overall increase. Industry,
electricity and water showed robust growth of 9.37%, adding +1.03 pp.
Public administration, education and health expanded by 6.85% to push
the overall figure up by +0.83. The fastest growth was in financial and
insurance activity, which rose by 27.71% y/y, adding 0.60pp.

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