The Economic Sentiment Indicator currently stands
at 79.3 percent, 21.7 percentage points below its long-term historical average and at the worst level since the first quarter of 2009
TIRANA, July 16 – Both businesses and consumers became more pessimistic about the economy in the second quarter of 2012 and do not expect any improvement in the third quarter, a Bank of Albania survey has found. Data show the Economic Sentiment Indicator (ESI), measuring both business and consumer confidence, dropped for the third quarter in a row. Consumer, services, industry and construction confidence all deteriorated, revealing that after the slight shrink in the first quarter of 2012, the Albanian economy continues suffering as indirectly shown by the performance of key taxes measuring consumption and exports. The ESI currently stands at 79.3 percent, 21.7 percentage points below its long-term historical average and at the worst level since the first quarter of 2009.
The industry sector, which accounts for 12 percent of the GDP and is dominated by processing exporting businesses, reported another drop in confidence on lower production and employment levels. Both domestic and foreign demand slightly dropped while industrial product prices continued their downward trend since the first quarter of 2011. Industry businesses expect demand, industrial production and the economic situation to further deteriorate in the third quarter of 2012.
Confidence in the crisis-hit construction sector continues deteriorating although to a lower degree. Currently the confidence index stands 22.3 percent below its historical average. The construction industry, one of the key drivers of the Albanian economy until 2008 has been continuously shrinking in the past three years due to lower migrant remittances, and tighter lending standards. INSTAT data show construction accounted for 11 percent of the GDP in 2010, down from 15 percent in 2008.
The situation is more problematic in the top services sector which accounts for 60 percent of the GDP. Confidence in this sector dominated by trade, hotels and restaurants dropped by 2.7 percent plunging to 10.5 percent below its historical average. Services businesses remain pessimistic even for the third quarter of 2012 due to lower demand, employment and investment prospects.
Consumers also continue becoming more pessimistic due to a drop in big purchases, deteriorating savings and expectations about their financial situation. Consumers expect unemployment to continue growing for the next six months.
Latest data published by the country’s Institute of Statistics (INSTAT show the GDP contracted by 0.2 percent in the first quarter of 2012 year-on-year as performance in the key industry and construction sectors registered sharp double-digit shrinks.
Corruption, the top concern for 98% of businesses
“Corruption and organized crime” is the key concern for an overwhelming majority of 97.8 percent of businesses operating in Albania, according to a survey conducted by the Business Albania Association. Second ranks the “poor efficiency of the tax administration and the judiciary system,” a major problem for 88 percent of surveyed companies. Third ranked blackmailing and arbitrariness by tax inspectors during controls, a problematic issue for 76 percent of businesses.
Barriers to lending and the numbers of permits required to open/close a business also remains an issue for 50 percent of businesses despite the opening of one-stop shops. Inability to enter new markets is also an issue for 31 percent of businesses.
Infrastructure, the customs service, and fiscal policies are rated as least problematic
Another issue preventing business growth is the high tax rate, at an estimated 38.5 percent of the profit rate, which is much higher compared to other regional countries.
