Construction costs increase in first quarter

TIRANA, June 5 – Construction costs registered a slight increase even in the first quarter of 2013 when they rose by 1.1 percent year-on-year and 0.4 percent compared to the final quarter of 2012. Data from the country’s Institute of Statistics (INSTAT) show the slight increase in the construction cost index was a result of higher expenditure on machinery and transport and wages which rose by 1.7 to 2 percent compared to the first quarter of 2012.
Material expenditure which includes construction, electric and sanitary ware prices rose by only 0.3 percent year-on-year in the first quarter of 2013.
The Construction Cost Index calculates the difference of expenditure in construction, taking into consideration the change of basic input prices such as construction materials, construction vehicles and equipment, as well as expenses for employees.
The construction sector, once the key driver of the Albanian economy, but now accounting for only 11 percent of the GDP, declined by 15.4 percent year-on-year in the final quarter of 2012, and was also 1.4 percent down compared to the third quarter of the year. In crisis since 2008, due to falling purchasing power especially from crisis-hit migrants, the construction sector has failed to recover during the past four years also due to lending standards becoming tighter as bad loans stand at a record 24 percent. The construction sector saw its FDI stock drop to Euro 186 million in 2011, down from 227 million in 2010.
Latest Bank of Albania data show the construction sector leads the non-performing loan portfolio with 32 percent. Unpaid government bills for finished construction works and difficulty in obtaining new construction permits has also influenced.