The euro strengthened, but the balance of payments deficit remains at the highest levels since the pandemic

2024-09-12 13:39:15, Ekonomi CNA

The euro strengthened, but the balance of payments deficit remains at the

Illustrative photo, taken from Google

The current account deficit narrowed for the second quarter of the year.

According to data from the Bank of Albania, this deficit decreased to the value of 216 million euros, 7.3% less compared to the same period last year.

However, for the entire first 6 months, the current account deficit remains at the highest values ??since 2020, with a total value of 575 million euros or 53% more compared to the same period last year. The increase was determined by the negative performance of the first quarter, when the current account deficit widened by 150% on an annual basis.

So far, the deterioration of the current account balance is mainly due to the deepening of the trade deficit in goods. For the 6-month period, this deficit reached the value of almost 2.6 billion euros, with an increase of 23% compared to the same period last year. Even this year, exports of goods continue to decrease, while imports are increasing, following the increase in consumption and domestic demand, which is mainly met by foreign goods.

On the other hand, this year the exports of services are proving insufficient to compensate for the deep deficit in goods. The balance in trade in services was positive in the value of approximately 1.5 billion euros, increasing by 15% compared to the first half of last year. Approximately half of the contribution to the services sector came from tourism, which in the first six months of the year brought the economy a net income of 740 million euros, an increase of 28% compared to the first half of last year.

Source: Bank of Albania

Meanwhile, this year, the contribution of the fashion industry is on the decline. Revenue from physical input processing services owned by others fell to 358 million euros, down 9% compared to the same period a year ago.

In addition to the export of services, secondary income and mainly the remittances of immigrants remain the second column that mitigates the country's high trade deficit in goods. For the 6-month period, immigrants' remittances reached 510 million euros, increasing by 15% compared to the first half of last year.

Remittances this year have reached the highest historical value for the first 6 months of the year. A new cycle of their growth has started in the last decade, supported by new waves of Albanian emigration.

Negative net flows in the current account balance are, however, covered by foreign direct investment income and other informal flows from abroad, which cannot be accurately estimated. For the 6 months of 2024, foreign direct investments reached a record value of 749 million euros, which is 30% higher than the current account deficit for the same period./ Monitor.al