MFA: Strategic opportunities for foreign exporters
The devastating earthquake of November 2020 and the covid-19 pandemic caused a significant drop in GDP by 6.5% in 2020, an increase in the state budget deficit from the planned 1.9% to 6.8%, an increase in the negative current account balance of the balance of payments and an increase in public debt from 68.7 to 81.1% of GDP. However, this is a short-term situation that the economy will soon cope with. Therefore, the credit rating agencies also left the country’s credit risk unchanged, e.g. the Standard & Poor’s rating agency confirmed Albania’s credit rating as B+ with a stable outlook in February 2021. Economic growth of 6.0% is expected again in 2021.
In an attempt to limit the effects of the covid-19 pandemic on the economy, the government temporarily abandoned the policy of gradually reducing the public debt to the planned 60% of GDP in 2021. Fiscal consolidation thus becomes a medium-term goal, the increase in debt by 12.4% of GDP was used by the government and will continue to be used in in 2021 to support the population in connection with the pandemic (increase in social benefits, increase in salaries of health workers, teachers) and postponement or reduction of tax obligations for companies affected by the pandemic.
The government intends to use the largest part of the debt, amounting to 7.3% of GDP, to launch long-delayed projects in the field of transport infrastructure, which should ensure the restart of the economy. Aviation and road infrastructure projects are a priority. These are to support the tourism sector, which was the most affected by the pandemic and which is the most important sector of the Albanian economy with a share of almost 30% of the GDP.
The entertainment and leisure sector and the energy industry are considered by the government to be key sectors for the recovery of growth of the Albanian economy after the epidemic. In the energy sector, both the Albanian government and international institutions (such as the EBRD) are and will be focusing especially on supporting solar energy in order to attract the interest of foreign investors, diversify sources of electricity and increase the export of “green” energy. In this, they also have the support of international financial institutions, such as the EBRD.
A sector with great importance and potential is the Albanian agricultural and food industry, which, in addition to investments, also needs foreign technological and organizational know-how to increase efficiency and thus competitiveness (larger farms, technology, product certification).
Transport industry and infrastructure
The restart of the Albanian economy in 2021 is primarily to be ensured by investments in public infrastructure. Long-delayed projects for the construction of airports, roads, tunnels, railways and ports are being launched. Investments in the total amount of EUR 1 billion are allocated at the expense of a high budget deficit of 6.5% of GDP. The biggest project is the construction of a new international airport in Vlorë. The main road project will be the construction of a 6 km long tunnel under Mount Llogara.
In 2021, work on the long-delayed Tirana-Durres railway project is to begin, and in the course of the next five years, another 200 km of tracks will be reconstructed, especially the railway leading from Durres to Montenegro. In connection with the reconstruction of the Tirana-Durres line, Albanian Railways is also preparing the purchase of 6 passenger electric suburban train sets with 3 wagons (so-called Electric Multiple Unit Regional Vehicle).
Another important project will be the reconstruction of Albania’s largest port, Durres, which will turn into a tourist zone, a passenger transport terminal and a berth for private yachts. Commercial port activities will be moved to a new terminal on the outskirts of the city. Leading Dubai developer Emaar is to help with the development of the port with an investment of EUR 2 billion. The project will bring new opportunities for Czech companies in the field of construction, from design work, through the supply of building materials, technical security of buildings (smart building systems), information and communication technologies, and last but not least, furnishing the interiors of luxury hotels and shopping centers, e.g. decorative lighting.
The government is also preparing the reconstruction of the ports of Vlorë and Sarandë in the near future. In 2021, the project for the gradual installation of intelligent transport systems (ITS) for intercity road transport will be launched. The first sections where ITS is to be introduced will be the A1: Tirana–Durres and A3: Tirana–Elbassan highways. The project is part of the newly created National ITS Implementation Strategy, which is to gradually integrate Albanian transport into the multimodal system of inter-European transport according to EU standards.
Albania’s current energy system uses exclusively hydroelectric power plants to produce electricity. The total installed capacity of these power plants is 2,204 MW. Although the country has an area of only 28,748 km 2, its hydrographic distribution is up to 44 thousand. km 2 with a potential of 16 to 18 TWh of electricity. However, one-sided dependence on water resources poses a risk in case of low rainfall, which is why the government has decided to diversify electricity production by building solar and wind power plants. The government’s intention is to achieve a share of solar energy in total capacities of 35% (approx. 800 MW) in the next 5 years.
The first concession for the construction of a 175 MW solar park was granted in 2020 to the French company Voltalia. Albania has great potential for solar energy production, the number of hours of sunshine varies from 2100 to 2700 per year, which is twice as much as in the Czech Republic. The Ministry of Infrastructure and Energy of Albania has also prepared a program for the construction of wind farms in the form of granting licenses to private investors on the basis of international auctions. The first auction for the construction of a wind park with an installed capacity of 130 MW was issued in 2021, and others will follow.
The potential for wind energy production is also considerable, especially in the areas around the Adriatic coast. The annual average wind speed is between 6-8 m/s and the average wind energy density is between 250-600 W/m 2. The possibilities are for the construction of at least 20 wind parks with a total installed capacity of more than 2,000 MW.
Entertainment and leisure
According to allcountrylist, the tourism industry in Albania lacks capacity at the level of four and five star hotels. To attract investors to this segment of the market, the government provides tax incentives in the payment of income tax and real estate tax. The value added tax on all services in top hotels and resorts was also reduced from 20% to 6%. The new incentives have already attracted the Marriott and Hyatt hotel chains.
The government’s strategy in the field of tourism is to extend the tourist season and, in addition to stays by the sea, to focus on the promotion of natural and cultural heritage (monuments, natural phenomena), which would be accessible all year round. The government devotes the same effort to the development of a new branch of tourism in the country – agrotourism. In the form of loans and grants from international institutions, around EUR 250 million is to be invested in the development of tourist infrastructure in the coming years.
Extending the season on the sea coast to April to November (now May to September) could contribute to the development of medical tourism (paid for by health insurance companies) in spring and autumn. The relatively low prices of land and tourist real estate compared to other European coastal countries are an opportunity for investors not only in the field of beach and mountain tourism, but also in agritourism and health tourism.
Agricultural and food industry
The agricultural sector is another development priority of the Albanian government, mainly because of the 40% share of the population’s employment. However, the share of agriculture in GDP creation is relatively low (18%), as small family farms predominate, of which there are 350,000. The country has the prerequisites for large-scale organic food production, mainly in the fruit and vegetable sector. Livestock production is also important in mountainous areas, which make up 75% of the country’s area. The nature of agricultural production is reflected in the demand for small agricultural machinery (tractors of a smaller power range, small agricultural machines).
Czech products have a good name in Albania, because until the beginning of the 90s of the last century, the former Czechoslovakia was one of the largest suppliers of agricultural machinery to Albania. In March 2020, the EU decided to start accession talks with Albania. Albania will thus have to adapt its subsidy policy in this sector to the EU’s agricultural policy.
The agreement of the Albanian government, the EBRD and commercial banks on the Albanian Guarantee Fund for the support of the agrarian sector and rural development increased lending for investments in agricultural business. The loans are intended not only for larger agribusinesses (greenhouses, collection points for agricultural production, water management, processing lines), but also for small farmers who are to be provided with preferential microloans by the banks. European subsidies from the IPARD instrument are also widely used.