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Foreign investments are led by real estate, but the real growth comes from the financial sector

2023-12-26 13:49:01Biznes SHKRUAR NGA REDAKSIA VOX

Foreign investments are led by real estate, but the real growth comes from the

The real estate sector is leading foreign direct investment for the second consecutive year.

According to data from the Bank of Albania, for the third quarter of this year, foreign investments in real estate in Albania reached the value of 95 million euros, 24% more compared to the same period last year.

The growth of the third quarter has turned the real estate sector into the leader of foreign investments. Foreign investments in real estate for the 9th month of 2023 reached the value of 222 million euros.

The value of foreign investments in property is slightly down by 1.3% compared to the same period last year, however investments in this sector make up more than 20% of foreign investments for this year.

Purchases by foreign citizens in recent years have been a significant factor in the property market in Albania and have played a significant role in increasing property prices, especially in the post-pandemic period. Foreign investments have continued to grow in the last two years, despite the slowdown in the economy and the significant increase in interest rates.

After real estate, the second sector in terms of the value of foreign investments is the extractive industry. For the 9-month period, investments in the extractive industry sector reached 200 million euros.

Investments in the extractive industry have also suffered a slight decrease of 1% compared to a year ago. Flows in this sector consist mainly of reinvested profits of existing companies in the activity of crude oil extraction.

Although real estate and the extractive industry continue to lead the list of foreign investments, the main contribution to its growth this year is given by the financial sector.

The value of foreign investments in the branch of financial and insurance activities for the 9-month period reached 166 million euros, an increase of 80% compared to the same period a year ago.

The increase in the value of foreign investments in this sector seems to be mainly related to the increase in capital requirements for commercial banks. The new regulatory framework, which has started to be implemented since 2019, has forced banks to gradually increase their equity capital, mainly by capitalizing the accumulated profits of the activity, in addition to increasing the use of debt instruments known as regulatory capital.

The process of increasing legal capital requirements for banks is thus playing a significant role in increasing foreign direct investments.

The energy sector ranks fourth in terms of the value of foreign direct investments, with 121 million euros for the 9th month of 2023. However, even in this sector, the value of foreign investments appears to be decreasing, with 9% less compared to the same period of last year.

Energy led the growth of foreign direct investment in Albania for years, mainly thanks to the major investment in the TAP gas pipeline, but also to other important foreign investment projects, especially in hydropower. Meanwhile, in recent years, there has been an increase in interest mainly in the construction of photovoltaic parks, which produce solar energy.

A sector where this year is marked a significant increase in foreign direct investments is trade. For the 9-month period, foreign investments in this sector reached 106 million euros, an increase of 45% compared to a year ago.

According to data from the Bank of Albania, foreign direct investments in the first 9 months of the year reached a record figure of 1.09 billion euros, the highest historical level ever recorded for this period of the year. The value of foreign direct investments so far this year has increased by 10.6% compared to the same period a year ago. Among other things, the growth of foreign investments is supported to a significant degree by the strengthening of the Lek in the exchange rate.

Since more than half of foreign investments consist of reinvested profits, which are generally provided in local currency, their value has increased due to the appreciation of the Lek against the Euro.


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