Albania

Politics:

• Analysis

  Albania politics: Quick View - Independence anniversary is marred by boycot

  Event

  The Greek foreign minister and the Macedonian president stayed away from celebrations marking the centenary of Albanian independence on November 28th, amid strains in relations between Albania and its neighbours.

  Analysis

  The Greek foreign minister cancelled his scheduled attendance at the celebrations in Tirana in protest against a statement by Sali Berisha, which was interpreted by Greece as implying territorial claims. The offending words referred to "the Albania of all the Albanian lands" from Preveza (in northern Greece) to Presevo (in southern Serbia) and from Skopje (in Macedonia) to Podgorica (in Montenegro).

  Mr Berisha's office tried to play down the dispute, explaining that the statement referred to the historical context of Albania's declaration of independence from the Ottoman Empire in 1912, and did not represent any territorial claim to neighbouring countries. Relations between NATO allies Albania and Greece (home to hundreds of thousands of Albanian migrants) have improved considerably in recent years. However, tensions surface from time to time over unresolved issues, such as compensation for the ethnic Albanians who were expelled from northern Greece at the end of the second world war, and over the condition of the Greek minority in Albania.

  The Macedonian president, Gjorge Ivanov, also stayed away from the celebrations, after the car of the visiting Macedonian prime minister, Nikola Gruevski, was pelted with eggs the previous week. Albania condemned the incident, which was a rare display of anti-Macedonian sentiment in Albania. However, Mr Ivanov-whose nationalist sympathies are in tune with Mr Gruevski's views-may have been prompted to boycott the independence celebrations to signal his irritation with the ostentatious manifestations of Albanian patriotic sentiment to mark the centenary among ethnic Albanians in Macedonia.

  Macedonia and Albania have enjoyed good neighbourly relations in recent years. However, in Macedonia tensions between ethnic (Slavic-speaking) Macedonians and ethnic Albanians have not disappeared since the end of a six-month conflict in 2001, despite successive coalition governments including parties from both sides of the ethnic divide. With sizeable ethnic Albanian populations in Kosovo, Macedonia, Montenegro and southern Serbia, politicians have at times warned about the dangers of possible attempts to create a "Greater Albania", which would bring together Albanian-speaking populations in one state. Albania has repeatedly denied that it has any such aspirations.

  November 29, 2012

• Background

  Albania: Key figures

  Sali Berisha

  The prime minister and leader of the Democratic Party of Albania (DPA), Mr Berisha was a prominent cardiologist in the communist period. He led his party to victory in 1992 and served as president in 1992-97. However, he came under fire for his authoritarian leadership. Rioting triggered by the collapse of "pyramid" investment schemes forced him to call an early election in 1997; and a landslide victory for the Socialist Party of Albania (SPA) led him to resign the presidency. During his long period in opposition Mr Berisha retained his tight grip on the DPA as well as a capacity to worry observers with his unpredictable behaviour. However, he adopted a much more moderate and inclusive tone in the months leading up to the election in 2005. As prime minister, he has remained a highly controversial figure, with an abrasive manner, but he has not sought to revert to the domineering style he adopted during his presidency.

  Edi Rama

  Mr Rama, who has been the mayor of the capital, Tirana, since 2000, was elected leader of the opposition SPA in 2005, replacing Fatos Nano, a former prime minister, following the party's election defeat. A former painter and sculptor who served as minister of culture in 1998-2000, Mr Rama has been widely credited with improving Tirana's appearance, notably by painting buildings in bright colours and removing kiosks from the park in the city centre. An energetic campaigner, he joined the SPA only in late 2003, and has faced a difficult task in trying to tighten his grip on the SPA's organisation. The fact that the DPA's Bamir Topi was elected president in 2007 with the support of some SPA deputies loyal to Mr Nano indicated that Mr Rama still had a long way to go before he could expect to have full control over his party.

  Bamir Topi

  Mr Topi was elected president in a parliamentary vote in 2007. He joined the DPA in 1996 after an academic career as a biologist, and was the DPA's deputy head and the leader of its parliamentary group when he became head of state. Mr Topi is regarded as a soft-spoken, moderate politician, and he often represented the DPA in difficult negotiations with the SPA. He has occasionally voiced opinions that differ from those of Mr Berisha, but has never openly defied the DPA leader. Opinion polls have consistently indicated that Mr Topi is one of the most popular politicians in Albania.

  Ilir Meta

  Mr Meta served as an SPA prime minister in 1999-2002, during which time he was credited with restoring the government's control over the whole of the country, following the chaotic conditions that prevailed in the aftermath of the uprising in 1997. Despite his success, Mr Meta was undermined by his party leader, Mr Nano. Tired of the prolonged in-fighting, he left the SPA to create his own political party, the Socialist Movement for Integration (SMI) ahead of the election in 2005. Mr Meta does not have the high public profile or charisma of Mr Berisha or Mr Rama; however, he is an experienced political operator, whose support may yet be needed for the formation of a government after the next election.

  February 24, 2009

• Structure

  Albania: Political structure

  Official name

  Republic of Albania

  Legal system

  The current constitution was adopted by referendum on November 22nd 1998 and came into effect on November 28th 1998. It replaced the interim constitution that had been in place following the abandonment of the Marxist-inspired constitution in April 1991

  National legislature

  Unicameral Assembly of 140 members elected by proportional representation from 12 regional lists

  National elections

  Albania held a parliamentary election on June 28th 2009. Next election due in mid-2013

  Head of state

  President, currently Bujar Nishani, who was elected by parliament on June 11th 2012

  National government

  Coalition government, led by the Democratic Party of Albania, sworn in on September 17th 2009

  Main political parties

  Democratic Party of Albania (DPA), Socialist Movement for Integration (SMI), Republican Party (RP), Agrarian and Environmentalist Party (AEP), Liberal Democratic Union (LDU), Party for Justice and Integration, Socialist Party of Albania (SPA), Social Democratic Party (SDP), Democratic Alliance Party (DAP), Party of Social Democracy (PSD), Real Socialist Party '91 (RSP '91), Human Rights Union Party (HRUP), Christian Democratic Party (CDP), G99, Movement for National Development (MND)

  Members of the government

  Prime minister: Sali Berisha (DPA)

  Deputy prime minister: Edmond Haxhinasto (SMI)

  Minister of state for reforms: Genc Pollo (DPA)

  Key ministers

  Agriculture & food: Genc Ruli (DPA)

  Defence: Arben Imami (DPA)

  Economy, trade & energy: Edmond Haxhinasto (SMI)

  Education & science: Myqerem Tafaj (DPA)

  Environment & water: Fatmir Mediu (RP)

  European integration: Majlinda Bregu (DPA)

  Finance: Ridvan Bode (DPA)

  Foreign affairs: Edmond Panariti (SMI)

  Health: Nasip Naco (SMI)

  Internal affairs: Flamur Noka (DPA)

  Justice: Eduard Halimi (DPA)

  Labour & equal opportunities: Spiro Ksera (DPA)

  Public works, transport & telecommunications: Sokol Olldashi (DPA)

  Tourism, culture, youth & sport: Aldo Bumci (DPA)

  Assembly speaker

  Jozefina Topalli (DPA)

  Central bank governor

  Ardian Fullani

  November 01, 2012

Economy:

• Background

  Albania: Economic background

  Real gross domestic product by sector
  (% share of GDP)
  	2004	2005	2006	2007	2008
  Agriculture	23.5	22.8	22.4	21.2	20.6
  Industry	21.2	21.5	20.9	20.5	19.9
  Services	55.3	55.7	56.7	58.3	59.5
  Source: Economist Intelligence Unit.

  Download text file (csv format)

  February 24, 2009

• Structure

  Albania: Economic structure

  Economic structure: Annual indicators

  	2008a	2009a	2010a	2011a	2012b
  GDP at market prices (Lk bn)	1,088	1,141	1,225	1,290b	1,340
  GDP (US$ bn)	11.8	11.8	14.0	13.0	12.8
  Real GDP growth (%)	7.5	3.3	3.5	3.0b	0.7
  Consumer price inflation (av; %)	3.4	2.3	3.6	3.5	2.0
  Population (m)	3.2	3.2	3.2	3.2	3.2
  Exports of goods fob (US$ m)	1,355.6	1,048.0	1,547.9	1,954.3	1,876.2
  Imports of goods fob (US$ m)	-4,907.5	-4,264.2	-4,305.4	-5,075.5	-4,817.7
  Current-account balance (US$ m)	-2,048.1	-1,844.8	-1,404.0	-1,695.0	-1,450.0
  Foreign-exchange reserves excl gold (US$ m)	2,319.8	2,313.9	2,469.6	2,393.9	2,339.7
  Exchange rate Lk:US$ (av)	83.89	94.98	103.94	100.90	107.89
  a Actual. b Economist Intelligence Unit estimates.

  Download the numbers in Excel

  Origins of gross domestic product 2010	% of total	Components of gross domestic product 2010	% of total
  Agriculture	17.8	Private consumption	79.3
  Industry	10.1	Public consumption	9.5
  Construction	9.7	Gross fixed investment	33.1
  Transport	5.1	Exports of goods & services	32.2
  Other services	24.3	Imports of goods & services	-53.5
  Principal exports 2011	% of total	Principal imports 2011	% of total
  Textiles & footwear	32.4	Machinery	20.3
  Minerals, fuel & electricity	29.8	Minerals, fuel & electricity	18.8
  Building materials	21.2	Food, beverages & tobacco	16.9
  Food, beverages & tobacco	5.6	Building materials	15.1
  Machinery	4.0	Chemical & plastic products	11.1
  Main destinations of exports 2011	% of total	Main origins of imports 2011	% of total
  Italy	53.1	Italy	30.6
  Kosovo	7.5	Greece	10.8
  Turkey	7.6	China	6.4
  Greece	5.2	Germany	5.8

  Download the numbers in Excel

  Download text file (csv format)

  November 01, 2012

• Outlook

  Albania: Country outlook

  Albania: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  OVERVIEW: The ruling coalition of the centre-right Democratic Party of Albania (DPA) and the centre-left Socialist Movement for Integration (SMI) has a small majority, but is expected to last until the next election, due in mid-2013. The opposition Socialist Party of Albania (SPA) has a good chance of returning to power after two election defeats, especially if the current economic downturn continues to erode the government's popularity. Albania has a good chance of becoming an EU candidate in the near future, but the Economist Intelligence Unit believes that the opening of EU accession talks will be conditional on the country adopting further reforms. The government faces the challenge of bringing about fiscal consolidation while attempting to stimulate economic growth. We estimate that real GDP in 2012 will grow by 0.7% and will average 2.5% in the 2013-14 forecast period, benefiting from a modest recovery in the euro zone. The current-account deficit is forecast to narrow from an estimated 11.7% of GDP in 2012 to an average of 10.8% of GDP in 2013-14.

  DOMESTIC POLITICS: The government formed by the incumbent prime minister, Sali Berisha, in September 2009 has a wafer-thin parliamentary majority, and is less stable than its predecessors. Mr Berisha brought into the coalition the SMI to ensure a parliamentary majority, which gives considerable power to the SMI leader, Ilir Meta, who broke away from the SPA in 2004 after party rivals dislodged him from the SPA-led government. The government says that it is determined to reform the public administration, strengthen the rule of law, fight corruption, improve the business environment, and pursue EU membership and closer NATO integration. Much needs to be done to translate this into practice. In a bid to intensify the fight against corruption and meet EU conditions for candidate status, the DPA and the SPA joined forces in September to adopt constitutional amendments restricting the extensive immunity from prosecution enjoyed by members of parliament (MPs), judges and other senior officials. However, political interference is likely to make it difficult for the judiciary to deal with high-level corruption. The organisation of elections is another area with scope for improvement. In July 2012 the DPA and the SPA reached an agreement on reforming the electoral code, which-if implemented-could help to create conditions for holding free and fair elections. The coalition is likely to last until the end of its mandate, in mid-2013, with Mr Berisha having passed up possible earlier opportunities for a snap election to exploit the weakness of Edi Rama, the SPA leader, during periods of internal strife in the SPA. Mr Meta may have missed opportunities to dissociate his party from the government's mixed record on the economy and corruption by leaving the ruling coalition. With Mr Rama adopting a more constructive approach since late 2011, ditching street protests in favour of presenting a positive alternative of economic policies, the SPA appears more united than in recent years. It would be risky for Mr Berisha to call an early election now, although a possible decision by the EU to grant Albania candidate status in December might tempt him to exploit this for electoral purposes. After faltering economic growth in 2012, and with only a weak pick-up expected in 2013, the government's popularity is likely to be undermined, and the SPA stands a good chance of being returned to office.

  INTERNATIONAL RELATIONS: EU integration, leading to eventual membership, is the foreign policy priority. Albania submitted a membership application in April 2009, but the European Commission made it clear, for two consecutive years, that the country was not ready to be granted candidate status. In the past few months Albania adopted reforms-including improvements to the electoral code and curbing MPs' extensive immunity from prosecution-leading to a breakthrough: the Commission's progress report published on October 10th recommended the granting of candidate status. However, the positive recommendation is subject to several conditions. The Commission wants Albania to adopt legislation to improve the workings of the judiciary, parliament and the public administration. To secure candidate status at the meeting of the European Council in December, the country will need to accelerate the pace of reform significantly. We consider that the country has a chance to achieve candidate status before end-2012, but if the reform process falters, it may be granted candidate status only on condition that it adopts the required legislation, as outlined by the Commission. Contribution to NATO is likely to increase as part of the country's closer integration with the alliance, which it joined in April 2009 with Croatia. Accession fulfilled a central foreign policy goal, and has received the overwhelming support of the public and the political establishment. Since joining NATO, Albania has doubled its troop deployment in Afghanistan, to around 300 soldiers, in response to calls from the US administration for greater military commitment by its allies. Albania will continue to forge closer links with Kosovo, which it recognised almost immediately after Kosovo declared independence from Serbia in 2008. The authorities will need to respond more positively to international demands for the judiciary to co-operate in the investigation of human-organ-trafficking and other crimes allegedly committed in Albania by Kosovo-based criminal organisations, as detailed in a report accepted by the Parliamentary Assembly of the Council of Europe in early 2011.

  POLICY TRENDS: Mr Berisha's second government has continued its predecessor's policy, reiterating that Albania does not need a successor agreement to its previous, three-year arrangement with the IMF (which expired in 2009). After repeated delays, the country successfully placed its first ever Eurobond in October 2010, and will continue to rely on commercial loans to finance its large external and fiscal deficits. However, the country may need to turn to the Fund for assistance if demand for merchandise exports and migrant workers remains depressed beyond the modest recession expected in the euro zone in 2012, and if the lek depreciates more sharply than in 2011-12. Even without the uncertainty surrounding euro zone economic prospects, the investment climate in Albania is likely to remain among the toughest in the region. Shortcomings in the public administration and the legal system, widespread corruption, and inadequate (albeit much improved) electricity supply and infrastructure pose particularly difficult problems. The government plans to complete the privatisation process in 2013, after selling off the state-owned oil producer, Albpetrol, in October 2012. However, there is a considerable risk that some of the planned sales will be delayed, given the authorities' track record, which has been highlighted by several stalled privatisations. Fiscal policy has become more prudent since the election in 2009, which was preceded by a rush to finish large public investment projects. The budget deficit shrank to 3.5% of GDP in 2011 (from 7.4% of GDP in 2009), following a sharp reduction in capital expenditure. The government is likely to face challenges: a smaller than expected rise in tax receipts as economic growth slows markedly in 2012 and rebounds only modestly in 2013, further budget support for the power utility, KESh-which has required amendments to the 2012 budget-and cost overruns on the new Tirana-Elbasan road. We forecast that election-related expenditure will cause the budget deficit to widen to 3.9% of GDP in 2013 (from an estimated 3.1% of GDP in 2012), before tighter fiscal policy and increased tax receipts help to narrow it to 2.7% of GDP in 2014. After raising its key repurchase (repo) rate by 25 basis points in March 2011, to 5.25%, as inflation exceeded its target band of 2-4%, the Bank of Albania (BoA, the central bank) has cut the rate on five separate occasions by a total of 125 basis points, bringing it down to a historical low of 4% in July 2012. This followed a sharp disinflationary trend in the second half of 2011; inflation in February 2012 (0.6%) was the lowest in 12 years. Since then inflation has accelerated modestly, but with international oil prices forecast to decline in 2013, the BoA could lower the repo rate further to stimulate lending, particularly if domestic demand fails to pick up. The BoA will continue to encourage lending in leks (which accounts for only around one-third of total lending) to improve monetary policy transmission and mitigate currency risk. Modest corrections to the current-account and budget deficits in 2014 will support the currency.

  ECONOMIC GROWTH: After weathering the global downturn better than its neighbours (Albania avoided recession in 2009), real growth remained lacklustre in 2009-11, at an annual average of 3.3%, and is estimated to plummet in to 0.7% in 2012, because of the expected euro zone recession. Demand for Albanian products, which remained relatively resilient in January-August 2012, should pick up when modest growth in Albania's main EU export destinations returns in 2013. Exports will be boosted by the weak lek, which has depreciated sharply since 2009, although it was stable against the euro in January-August 2012. Remittances from migrant workers, which are expected to decline in 2012, should rebound modestly as the recovery in the euro zone resumes in 2013. Investor confidence may receive a boost if EU candidate status is granted, which looks likely in the next few months, albeit it may be subject to conditions. However, there is a strong downside risk if the recession in the euro zone proves more prolonged than forecast. Albania is vulnerable to the impact of the euro zone sovereign debt crisis because the countries most affected include Italy and Greece, which are traditionally its two largest trade partners, and their banks have a large presence in Albania. Greece and Italy are also the main destinations for Albanian migrant workers, and the prolonged crises in these two countries will dampen private consumption growth in Albania because of many households' dependence on workers' remittances. In view of our expectation of a weak rebound in the euro zone in 2013, we forecast real GDP growth in Albania of 1.9%. As the euro zone returns to stronger growth, increasing demand for Albanian exports and boosting remittances from migrant workers, we expect real GDP growth to accelerate to 3% in 2014-still well below the average of 6% in the boom years before 2009.

  EXTERNAL ACCOUNT: The current-account deficit in 2011 was US$1.7bn (13.3% of GDP). In the first half of 2012 the deficit was US$579m, 22% smaller than a year earlier, reflecting a marked slowdown in economic growth and domestic demand, and lower international commodity prices. Stronger demand from the euro zone as it recovers in 2013 should stimulate exports and current transfers credits. These are likely to be offset by increased import demand as economic activity picks up and, in 2013, by looser fiscal policy, driven by election-related expenditure. We forecast that tighter fiscal policy in 2014 will partly mitigate a rise in import demand, stemming from stronger economic growth, while exports and remittances increase robustly. We forecast the current-account deficit to shrink to 11.5% of GDP in 2013 and 10% of GDP in 2014, from an estimated 11.7% of GDP in 2012.

  October 31, 2012

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Country Briefing

Total area

28,748 sq km

Population

2,831,741 (census of October 1st 2011 of resident population)

Main towns

Population according to the 2011 census

Tirana (capital): 536,998

Durres: 199,073

Fier: 125,353

Vlora: 117,850

Elbasan: 116,971

Shkodra: 96,328

Korce: 88,358

Climate

Mediterranean on the coastal plain, much harsher in mountainous areas

Weather in Tirana (altitude 89 metres)

Hottest month: August, 17-31°C; coldest month: January, 2-12°C; driest months: July and August, 32 mm average rainfall; wettest month: December, 211 mm average rainfall

Language

Albanian

Measures

Metric system

Currency

Lek (Lk) = 100 qindarkas

Time

One hour ahead of GMT in winter; two hours ahead in summer

Fiscal year

Calendar year

Public holidays

January 1st-2nd (New Year), March 15th (Summer Day), March 20th (Nevruz), April 9th (Easter), May 1st (Labour Day), August 18th (Lesser Bajram), October 19th (Mother Teresa Day), October 26th (Greater Bajram), November 28th (Independence Day), November 29th (Liberation Day), December 25th (Christmas Day)

If a public holiday falls on a Saturday, the previous Friday is taken as a non-working day; if a public holiday falls on a Sunday, the following Monday is a non-working day

August 01, 2012