Services which account for 57 percent of the gross value added and employs 36 percent of the population registered a double digit decline in confidence at the end of 2011
TIRANA, Jan. 18 – A slight recovery in the consumer confidence failed to improve Albania’s Economic Sentiment Indicator (ESI) as business confidence in the key services and construction sectors registered sharp declines, proving the ongoing tough times for enterprises in Albania. The latest Bank of Albania survey for the final quarter of 2011 shows services which account for 57 percent of the gross value added and employs 36 percent of the population registered a double digit decline in confidence at the end of 2011. As a result, Albania’s Economic Sentiment Indicator (ESI), measuring both consumer and business expectations dropped by 7.9 percentage points, remaining 16.5 percent below its long-term historical average.
The central bank survey reveals a 10.4 percent drop in the services sector, registering the lowest level since 2005 when BoA starting measuring it. The sharp fall comes after two quarters of recovering confidence, with businesses of this sector heavily pessimistic about the overall business situation and employment. The services capacity utilization rate stands at 70.8 percent, 7.7 percentage points down compared to the third quarter of 2011. What’s more, low current and expected demand will keep investments for the first half of 2012 at very low levels as almost 92 percent of businesses say the current capacity utilization rates are sufficient.
The construction sector, once the main driver of the Albanian economy, continues suffering crisis effects since 2008 due to falling demand. For the fourth quarter of 2012, confidence in the construction sector dropped by 7.2 percent, plunging into its lowest historical level of -26.2 percent. While demand and production in construction worsens, employment also fell by 3.5 percent in the final quarter of 2011.
The construction and industry sectors in Albania account for 15 percent and 10 percent of the GDP respectively, employing around 19.9 percent of the population, according to Eurostat 2009 data.
The situation appears grim even for the industry sector whose confidence rose by a mere 0.8 percentage points for the final quarter of 2011 as foreign demand for Albania products dropped. Industry businesses expect a slight increase in exports for the first quarter of 2012 but remain pessimistic about domestic demand, the overall situation of their businesses and employment opportunities.
Unlike businesses, consumers became slightly more optimistic in the final quarter of 2010 when they celebrated the year-end holidays. The BoA survey shows consumer confidence rose by 3.1 percent mainly as a result of big purchases. Consumers’ assessments about their households’ financial situation and the general economic situation slowed down as the cost of living rose. Differently from the government, consumers expect prices to rise and the unemployment rate to continue growing for 2012.
Problems with power supply, corruption, informal economy, law and order and the tense domestic political climate are reported to have negatively contributed to the business performance in the fourth quarter of 2011 and expectations for 2012.
