Foreign Direct Investment increased again in the third quarter of the year. Data from the Bank of Albania show that they amounted to EUR 251 million, 3.3% more compared to the same period last year. 

The third-quarter increase further improved the annual progressive balance sheet. For the first 9 months of 2021, Albania has absorbed Foreign Direct Investments in the amount of EUR 711 million, an increase of 1.1% compared to the same period a year ago. By the end of the 6-month period, the increase had been 0.65%. 

Almost half of the foreign investment in the third quarter of the year was reinvested earnings. Their value reached 118 million euros, 39% more compared to a year ago. Consistently in recent years, there is a high contribution of this item of foreign direct investment. The reinvested earnings of existing investors for the entire 9-month period amounted to EUR 353 million or approximately 50% of foreign direct investment for the period. 

Reinvested earnings have offset part of the decline in new foreign investment flows and their high share is characteristic in branches where significant periodic investments are required, both in the extractive industry and in some service sectors. One of the factors that explain the maintenance of high levels of foreign direct investment is precisely the contribution of existing investors. 

The structure of foreign direct investment by sectors is available until mid-2021. For the first 6 months of this year, the extractive industry was the sector that has attracted the most foreign investment, with 95 million euros or 20% of the total. The flows in this sector consist mainly of reinvested profits of existing companies in the crude oil extraction activity. 

This year crude oil prices have been on the rise, following the cycle of recovery of the world economy after the severe shock gave the pandemic last year. Given that the rise in prices has continued further in the third quarter, it is expected that this has stimulated high levels of foreign investment in this sector in the future. 

Investments in asset activities also marked a significant increase in the first half of the year for real estate. Investments in this sector have reached the value of EUR 80 million, with an annual increase of 186%. Rising prices in the real estate market seem to be attracting not only domestic investment but also foreign capital. 

This year there is a tendency of return on foreign investment in strategic sectors, such as banking and telecommunications. At the beginning of December, the Hungarian group OTP announced the reaching of an agreement for the purchase of Alpha Bank Albania for 55 million euros. For OTP, this was the second acquisition in the Albanian banking market in three years. 

For the first half of this year, the financial sector has attracted investments worth 76 million euros, an increase of 27% compared to the same period a year ago. Days later, another Hungarian company, 4iG, announced an agreement to buy the country's largest fixed-line communications operator, Albtelecom.

(Source: Monitor)