According to the central bank’s survey, the confidence of businesses and consumers in the economy fell by 5.1 percent in the fourth quarter of 2009. Outlook for first quarter of 2010 is mixed.
Andi Balla
TIRANA, March 18 – The confidence of Albanian consumers and businesses in the economy has declined by 5.1 percent, according to Bank of Albania’s latest figures.
The central bank’s latest economic confidence survey, measured for the last quarter of 2009 for the construction, services and industry sectors shows a trend of diminished confidence in the country’s economy, particularly in construction.
According to the central bank’s survey, the confidence of businesses and consumers in the economy fell by 5.1 percent in the fourth quarter of 2009. In total, this indicator is 16.8 percent less than average since 2002, when the bank started to measure the country’s economic trends.
The construction sector was among the hardest hit. Demand for construction decreased 17.6 percent and the performance of products continues to be negative with a decline of 15.2 percent, while employment in the sector has also taken a hit, with a decrease of 5.2 percent.
“The construction confidence index recorded a decrease of 12.8 percent in the fourth quarter of 2009, marking the lowest historical value since the beginning of measurements, in the second quarter of 2002,” according to the survey.
But individual consumer confidence suffered only a decline of 0.5 percent.
“Consumers looked at the current financial situation negatively in the fourth quarter. They also negatively assessed the general economic situation in the country during the fourth quarter of the year, the balance of which declined by 7.9 percent,” according to the survey. “Consumers expressed concern about the increase in living expenses during the fourth quarter, in which the net balance increased by about 14 percent compared to the previous quarter. Also, consumers expressed concern for the increased cost of living compared to the same period a year earlier, although to a lower level compared with the worry about the previous quarter.”
Looking forward to 2010, the construction businesses’ expectations for the performance of the economy in general and their economic activity in particular during the first quarter of 2010 were negative.
In the first quarter of 2010, the manufacturing businesses expect improvement in industrial production and demand, although expectations for the economic situation in the country are in decline.
Expectations of service sector companies for the first quarter of 2010 are lower than the outlook for the general economic and business situation. Also, they expect a decline in this sector’s employment in the next quarter.
While the index of consumer expectations of the general economic situation for the first quarter of 2010 marked a decrease.
Businesses report a higher deterioration in their financial situation than in the previous quarter. The report added that declining domestic and external demands and a deterioration in the level of new orders have added to the sector’s vows.
Factors with greatest negative impact on normal business performance in the manufacturing industry are those dealing with legal and institutional frameworks as well as their and relations with banks.
Although tourism was expected to increase confidence in the service sector, last quarter again closed with a negative balance, even though the services confidence indicator registered only a slight decline, 0.2 percent. Improving the financial balances to adjust for season-based highs could not fully compensate for the declining balance of the general economic situation and the increase in employment.
Services were least affected, however, businesses said that in the last quarter their relationship with banks is a main factor that inhibits their normal business activity. The informal economy also continues to be a problem.
