TIRANA, Jan. 21 – As Greeks heads to the polls on Dec. 25 and leftist Syriza party holds the lead in opinion polls, a possible exit of Greece from the Eurozone would also affect Albania, where the neghbouring country is one of the top trade partners, investors and source of remittances.
Analysts in Albania say Greece’s return to its old drachma currency, which is little likely to happen, would have positive impacts in the short run because of the transfer of savings by Albanian migrants there but negatively affect remittances in the long run because of a weaker drachma.
Ardian Civici, an economy expert, says Greece’s eurozone exist would favour Albanian imports from Greece but damage Albanian exports to the neighbouring country.
Back in 2012 when Greece was still in recession, the Albanian Centre for Competitiveness and International Trade (ACIT) had also warned of panic withdrawal of deposits if Greece returns to its old currency. Greek banks account for one-fifth of Albania’s banking system
As elsewhere in the region, Albanian banks witnessed substantial panic deposit withdrawals in the face of spillovers from instability of global financial markets, which were compounded by concerns about the health of the Greek banking system in the fall of 2008. Ample liquidity buffers were utilized to meet deposit withdrawals. To boost confidence, deposit insurance limits were raised fivefold to 2.5 million lek (25,000 US dollars), and deposits started to recover from the second half of 2009.
“If Greece abandons the Euro and reintroduces a depreciated drachma, Albanian exports to Greece would become more expensive and thus a significant drop in exports could be expected, deteriorating even further the trade balance. Secondly, Albania would receive lower remittances by at least half the value,” said ACIT.
“If Greece exits the Eurozone, the Albanian public might react by withdrawing their deposits, almost triggering a banking panic. This might disrupt the banking system and therefore have immediate repercussion on the economy,” it added.
Greece’s escape of its crippling six-year recession with two consecutive positive growth rates in the second and third quarter of this year is good news for the economy in Albania where the neighbouring country is the second top trade partner and the largest foreign investor.
Greece has recently emerged among the fastest-growing eurozone economies after growing by 0.4 percent and 1.4 percent in the second and third quarters of this year. However, experts estimate that it will take years for Greece to recoup the economic ground during its worst-ever recession that has made its economy around a quarter smaller compared to the onset of recession in summer 2008.
Neighbouring Greece, whose position as Albania’s second top trade partner sharply weakened during the past six years, registered a surprise increase in foreign direct investment in 2013 with its FDI stock exceeding 1 billion euros, according to annual Bank of Albania data.
