The economic recovery in the Western Balkans region lost some speed in the first quarter of 2022, but the pace remains high.
For Albania, the report says that the recovery in economic activity continued in the first quarter of 2022, with real GDP expanding by 6% on an annual basis, following a 5.5% increase in the previous quarter. The expansion was mainly supported by strong growth in investment and private consumption.
According to the report, construction (1.95 percentage points), real estate activities (1.5 pp.) and trade (0.9 pp.) remain the largest contributors to GDP growth. The manufacturing sector and financial and professional services have also performed well, recording double-digit growth rates.
The labor market continued to show an opposite trend. While the employment of the 15-64 age group increased by 0.7% on an annual basis, the employment of young people (age 15-29) decreased by 2.2% on an annual basis.
Employment growth mainly reflected the mobilization of the inactive population, as the inactivity rate fell significantly both quarter-on-quarter (by 2.5 percentage points) and year-on-year (by 4.5 percentage points), dropping to 28% in Q1-22, historically the lowest rate so far, according to the report.
The already high inflation rate rose further in March by almost 2 percentage points to 5.7% and accelerated to 6.7% in May and 7.4% in June 2022, driven by rising import prices for food, energy and transport. This acceleration largely reflected the impact of the Russian occupation of Ukraine on international commodity prices, which also lifted import price index growth to 10% y/y in Q1 2022 (from 4.9% in Q4-21).
After the first increase in March, the Bank of Albania (BSH) kept the base interest rate at 1.0% until early July, when it was further increased by 0.25 percentage points. to 1.25% due to the acceleration of inflation and the tightening of financial conditions.
/Klara Ruci/
