Real estate led to the growth of foreign direct investment in the third quarter of the year. Data from the Bank of Albania show that this sector brought the largest inflow of foreign investment, with EUR 61 million, 154% more compared to the same period last year. 

For the 9-month period, investments in this sector have reached the value of EUR 141 million, an annual increase of 171%. So far, real estate is this year the second sector in terms of the share of foreign direct investment, after the extractive industry. Rising prices in the real estate market seem to be attracting not only domestic investment but also foreign capital. The figures show that foreign investment in the real estate sector has reached historic lows, at least since 2014, when the Bank of Albania launched the time series for this indicator. 

The extractive industry sector recorded high levels of foreign direct investment for the third quarter of the year, with EUR 52 million, twice as much compared to the same period last year. For the entire first 9 months of this year, the extractive industry remains the sector that has attracted the most foreign investment, with EUR 147 million or 21% of the total. The flows in this sector consist mainly of reinvested profits of existing companies in the crude oil extraction activity. The significant increase in crude oil prices in international markets this year seems to have stimulated the increase of foreign investment in oil extraction in Albania, especially during the second and third quarters. 

The third sector in terms of the value of foreign direct investment remains that of financial services. For the third quarter of the year, foreign direct investment in the financial market reached EUR 38 million, 41% more compared to the third quarter of 2020. For the entire 9-month period, investments in this sector amounted to EUR 114 million, 31% more compared to the same period of the previous year, the banking sector continuously brings significant investment flows, because the growth of commercial banks requires a gradual increase of share capital, in order to comply with regulatory requirements. 

Meanwhile, in the energy sector, foreign direct investment was significantly declining in the third quarter, with only three million euros, while in the same period a year ago they were worth EUR 69 million. For the 9-month period, investments in energy were worth EUR 45 million, down 80% over the same period a year ago. The decline in investment in the energy sector was an expected development, following the completion of the TAP pipeline and major hydropower investment projects. Now the attention of investors has turned especially to solar energy, however, at the moment the investments are far from those of previous years. 

The third quarter brought a slowdown in foreign investment in the manufacturing industry, which fell to EUR 28m, from EUR 32m in the same period a year earlier. However, for the 9-month period, the balance sheet remains slightly increasing, by EUR 71 million or 6% more than the same period last year. 

Another branch with an increasing foreign investment this year is that of professional, scientific and technical services, a branch mainly related to call center activities, technical support or sales for financial services platforms. For the first 9 months of 2021, this sector attracted foreign investment in the amount of EUR 43 million, 59% more compared to a year ago. 

However, growth has been mainly concentrated in the first quarter, while further foreign investment has been between stagnation and decline. This sector may suffer from increasing pressure from law enforcement agencies, especially for companies that mediate investments in online stock exchanges. 

In many cases, these companies also engage in genuine fraud schemes, mainly against foreign nationals. In the first 9 months of this year, Albania attracted a total of EUR 711 million of foreign direct investment, an increase of 1.1% over the same period a year earlier.

(Source: Monitor)