According to latest data from INSTAT, the Albanian economy posted 0.5% growth in the second quarter, apparently slower compared with growth rates in the first quarter. By sector, economic growth, in this period, was sustained mainly by the positive performance of agriculture and individual branches of industry and services sectors. Valueadded in agriculture was up 3.4%, providing significant contribution by this sector to the overall economic growth during the second quarter. On the other hand, the services sector’s annual value-added was up by 1.8%, slowing down significantly from previous quarters’ rates. Transport and financial intermediation were the main drivers of this sector, whereas most of other branches of the services sector contracted, year on year. Likewise, the industry sector shrank by 8.5% in the second quarter, after its positive performance in the last six quarters. Industry sector deceleration during this quarter was largely influenced by slashed output in “Energy, water and gas”, whereas extraction and processing industry continued their upward value-added. After its surge in the first quarter of 2011, the construction sector contracted again in the second quarter, posting annualised downgrade of 1.7%. As regards aggregate demand, during the first half of the year, economic growth was supported mainly by the public sector and foreign demand contributions, whereas internal demand was lacklustre. Available data suggest that private consumption and investments were sluggish during the first half of the year, thus conditioning the below-potential growth of the economy during this period. Private consumption continues to reflect consumers’ reluctance to spend and their inclination to save.

Public spending and budget deficit growth rates moderated after the first quarter, settled at low levels in the second and third quarters, and recorded obvious acceleration in the last quarter of the year. At the end of November, budget deficit was ALL 38 billion, reflecting 5.4% public spending increase and 0.7% budget revenues increase during this period. Acceleration of annualised budget expenditures in the last two months of the year owes primarily to higher capital expenditures during this period. Added prudence to fiscal stability, which characterises the 2012 budget, is expected to be reflected in lower contribution by the public sector to economic growth for 2012. Nonetheless, the Bank of Albania deems that this is an appropriate step to maintain macroeconomic stability and reduce risk premiums in the economy. Budget deficit narrowing in 2012 and its funding with domestic resources would generate more room for expansion of lending to the private sector in this period. Albanian economy continued to benefit from foreign demand in 2011, though at more moderate levels than in 2010. Annual growth of Albanian exports in value for the first eleven months of the year was 19.9%, implying slower rates compared with the corresponding period of a year earlier. On the other hand, imports accelerated their annual growth to 12.2%. Trade deficit widened by 8.1%, year on year, largely illustrating negative effects of price rise in global markets. A more detailed analysis of the trade deficit reveals that about 50% of its increase is created by the balance of electric energy exchange.