Albania Deficit Worsens in 2001

TIRANA, March 23 (Reuters) - Albania's current account deficit worsened in 2001 due to a rising trade deficit but the surge was less than expected, the central bank said on Saturday. The Bank of Albania (BoA) said that last year's the current account deficit rose to six percent of the gross domestic production (GDP), up from 4.3 percent in 2000.

The bank was expecting the deficit to be at least 40 percent bigger due to severe power shortages that hit the Balkan country in winter forcing many businesses to halt operations or use expensive generators, thus incurring extra costs. A 16 percent year-on-year increase in remittances from Albanians working abroad to $542 million helped limit the widening of the current account deficit, it said. "Surpluses in transfers, incomes and services were not enough to cope with the fast rise of the trade deficit, thus the current account deficit rose $55 million (year on year in 2001)," the BoA said in a statement.

Albania, one of the Europe's poorest countries, imports four times more than it exports. More than 70 percent of its imports and almost 90 percent of its exports are traded with its two neighbors, Italy and Greece, both EU members. Last year exports -- 73 percent of which are re-exports of textiles and footwear -- rose by 19 percent compared to 2000. They were outdone by a 24 percent year on year rise in imports.

"The power crisis, unfavourable oil prices at the start of 2001, the entrance into the market of two mobile operators, were the main factors that drove a rise in the trade gap, causing rising imports of fuel and equipment and a rise in internal costs that caused a fall in re-exports," the bank said. It said the rise in foreign direct investments by 53 percent year on year to $220.2 million, was mainly driven by disbursement of foreign loans which last year amounted to $98 million.

The Bank of Albania foreign exchange reserve was at 6.8 months of imports, at the same level of 2000 despite rising nominally by $13 million.