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| Cover of quarterly report of European Commission on Balkans |
The European Commission's first quarterly report on candidate countries has warned that the Balkan states will suffer the consequences of Russia's attacks on Ukraine in the global economy.
"The Russian occupation of Ukraine in February is expected to have a negative impact on the economies of the Western Balkans through various transmission channels. "In particular, the continuing rise in energy, food, and transport prices is fueling a further acceleration of inflation, which has pushed the region's central banks to start raising the monetary policy rate after an extended period of easing monetary policy." the report states, Monitor reports.
For Albania, the EC emphasizes that the recovery of the Albanian economy continued in the fourth quarter-2021 with real GDP growth on an annual basis of 5.5%, after expanding by 6.8% in the third quarter of the year. The slowdown partly reflects the underlying effects of the positive growth rate in Q4-2020. Private and public consumption grew broadly at the same pace as in the third quarter, by 5.5% and 6.8%, respectively. Investments increased by 15.6%, contributing to the strong growth of imports of goods (+ 32.9% on an annual basis).
Exports (+ 24.4% annual expansion) remained a major driver of growth.
On the output side, construction (1.8 percentage points) and trade and real estate activities (1 and 0.8 percentage points) made the largest contributions to GDP growth. After a period of recovery during most of 2021 above its historical average, the economic confidence indicator fell in January and February 2022, affected by a cross-sectoral loss of confidence. In particular, consumer and construction confidence has weakened, while all sectors expect price increases.
Balkans
According to the report, after the recession caused by the pandemic in 2020, the effects of the COVID-19 crisis diminished and economic activity recovered strongly in the Western Balkans in 2021, with the region's GDP estimated to have expanded by 7.6%, compared to a contraction of 3.3% a year ago. The recovery was supported by the gradual lifting of COVID-19-related control measures, which led to stronger internal and external demand. In line with the recovery of economic activity, employment growth returned to positive territory and unemployment rates fell or remained largely unchanged, while labor force participation increased.
The region's current account deficit stood at 4.8% of GDP in 2021, the lowest level in the last ten years, as the strong recovery of utility exports and higher remittance flows generally outpaced the growing trade deficit of goods.