Albania Watch: Construction and tourism keep economy on fast track in Q3
Economic activity accelerated in Q3 2022, reaching 4% yoy growth, compared to 2.7% (revised upwards from 2.2%) in Q2. We confirm our 2022 FY forecast for GDP growth of 3.9%, as upwards revised data in Q2 balances out lower public investments in Q4, as indicated by the fiscal surplus of the first 11 months of 2022. In our opinion, although the government will speed up the tendering process in December, it will not be able to fill the gap. Thus, the contribution to GDP from the public investments in Q4 is projected to be lower than initially forecast.
Growth picks up speed in Q3, after upward revision of growth in Q2
Economic activity accelerated during Q3 2022, reaching a 4% yoy growth rate, and improved compared to the previous quarter’s slack growth rate of 2.7% (revised upwards from 2.2%). This growth rate stood very close to our projection for Q3 2022 (3.9%) and we expect the next quarter’s figure will hover around 3.1%.
Construction, Tourism and Real Estate account for 90% of GDP growth
The GDP figure for Q3 2022 pertains to robust contributions from Trade, Tourism and Accommodation (1.9pp), Construction (1pp) and Real Estate (0.8pp). The contribution from Trade and services related to Tourism is a nexus for this quarter’s economic growth, as it accounts for approximately 50% of GDP growth, with the remaining major positive contributions from Construction and Real Estate. In addition, entertainment rallied compared to Q3 2021, by logging a positive 0.7pp contribution to GDP.
Sectoral contributions to Q3 GDP (in pp)
Tourism related services were the engine of growth in Q3
In terms of yearly growth rates, three categories registered double-digit jumps, namely Entertainment (the fastest-expanding activity during Q3 by 37.5%), followed by Real estate (13.8%) and Construction (10.7%). Trade, Financial activities, and IT also expanded by 9.9%, 7.9% and 6.5%, respectively. On the other hand, Industry, Health and Net Taxes shrank by -1.4%, -3.3% and -1.9%, respectively.
Government fiscal restraint continues to act as a drag on growth in Q3 and Q4
On the expenditure side, Imports continued to expand at a rate of 16.3% (slightly down from the previous quarter’s growth rate of 17%), followed by Private Consumption and GFCF posting growth rates of 8.1% and 7.1%, respectively. It is worth mentioning that GFCF posted a positive growth rate of 7.1%, significantly up from the previous quarter’s negative growth of -6.7%. Exports of products and services logged a sluggish increase of 0.9%. Public Consumption was the only group to shrink (-3.6%), still an improvement from the previous quarter’s negative growth rate of -8.5%.
Private investments recover from the costs shock of the Ukrainian war (% yoy)
We confirm our full year forecast for a GDP growth of 3.9% in 2022 as upwards revised data in Q2 balance out the expectedly lower public investments in Q4, as indicated by the fiscal surplus of the first 11 months of 2022. In our opinion, although the government will speed up the tendering process in December, it will not be able to fill the gap. Thus, the contribution to GDP from the public investments is projected to be lower in Q4 2022.
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Fjorent RRUSHI
Albania Fjorent is the head of ALM & Research for Raiffeisen Bank Albania. After a MSc in International Business from the University of Trieste and an MBA from MIB School of Management in Italy he started as an Investor Relations financial analyst at the aerospace & defense company Leonardo in Rome. After that he moved to the Italian Stock Exchange in Milan promoting blue chip companies through roadshows with institutional investors and after the merger with London Stock Exchange was in charge of primary markets of potential to be listed companies in Eastern Europe. In 2011 moved back to his native country to join Raiffeisen Bank in ALM & Research team in charge of fund transfer pricing, liquidity management and IRRBB. After a period at Intesa Sanpaolo Bank Albania as Head of pricing starting from 2021 he is heading the ALM & Research of Raiffeisen Bank Albania. Apart from macroeconomic analysis of particular interest for him is the disruptive technological transformation impacting the banking system. Fjorent’s hobby is football and he enjoys theatre and has been an amateur player as a teenager.
Aristea VLLAHU
Albania Aristea is part of the ALM & Research team at Raiffeisen Bank Albania. She is currently responsible for Funds Transfer Pricing and Macroeconomic Research in Raiffeisen Bank Albania. Her previous experience in ALM at Raiffeisen included interest rate risk management, interest sensitivity of income and stress testing. She also worked as Investment Analyst at Credins Invest, an asset management company in Albania. She holds a BA in Economics and MSc in Finance & Accounting from University of New York in Tirana and currently is a Level III Candidate for the CFA exam.
With the GDP growth of 2.1% in Q3 2022 and our expectations for an even harder Q4, due to the ongoing energy crisis and elevated prices, we have downgraded our full year 2022 real GDP growth forecast to 2.7%, from 3.5% previously. At the moment we are keeping our GDP growth projection of 2.9% in 2023 due to the relatively high inflation and energy crunch in the first part of the year. |