Findings of the latest survey carried out by the Bank of Albania show the Economic Sentiment Indicator grew by only 0.4 percentage points, standing at 14.6 percentage points below its long term average as expectations about the country’s economy remain grim
Tirana Times
TIRANA, July 17 – Albania’s Economic Sentiment Indicator (ESI), measuring both consumer and business expectations failed to recover in the second quarter of this year, as the slight improvement in consumer and services confidence was unable to compensate for the deterioration of the construction and industry sectors. Findings of the latest survey carried out by the Bank of Albania show the ESI grew by only 0.4 percentage points, standing at 14.6 percentage points below its long term average as expectations about the country’s economy remain grim.
Central bank data show confidence in the industry and construction sectors dropped by 6.9 and 11.2 percentage points respectively after recovering for two consecutive quarters.
The situation in the industry sector is a result of a drop in internal and external demand for industrial products but also administrative barriers. The presence of corruption and informal economy is reported to be the key barrier preventing the normal activity of industry businesses along with the problematic law and order situation, the legal framework and relations with banks.
Industry businesses are optimistic the situation will change in the third quarter of this year with demand, production and employment improving.
The situation in the crisis-hit construction industry which showed signs of recovery during the previous two quarters also deteriorated with the confidence index dropping by 11.2 percentage points and standing at 17 percent below its long term average.
Falling demand, but also problems with power supply, infrastructure, the legal framework, and relations with banks were the main factors preventing the normal activity of construction companies.
Consumer confidence in the second quarter of 2011 was up 2.2 percent as expectations about their household financial situation improved. However, consumers are still hesitant about making big purchasesנfearing tougher times ahead. Consumers expect the unemployment rate to increase in the next six months and prices to grow further in the next quarters.
The service sector confidence index grew by 4.7 percent in the second quarter of 2011 as assessments of these businesses about their employment and financial situations proved positive.
The domestic political climate was rated as the most negative factor affecting service businesses for the second quarter in row, as the political stalemate between the majority and the opposition intensifies.
Albania’s Economic Sentiment Indicator (ESI), dropped by 7.3 percent in the first quarter of this year, extending the gap to 14.7 percent below its long-term historical average.
The ESI reached its lowest rate, around 30 percent below its historical average, during the past decade at the end of 2008 and the beginning of 2009 when the first impacts of the global financial crisis appeared even in Albania with the deposit withdrawal impact.
During the past decade, the ESI reached its lowest rate, around 30 percent below its historical average, at the end of 2008 and the beginning of 2009 when the first impacts of the global financial crisis appeared even in Albania with the deposit withdrawal impact.
The Albanian government expects the country’s economy to grow by 5 percent this year after making budget cuts to keep public debt and the budget deficit in check. Meanwhile, the International Monetary Fund has lowered its 2011 GDP growth estimate for Albania to 2.7 percent, down from 3.4 percent earlier this year.
Latest data published by the country’s Institute of Statistics show the Albanian economy grew by 3.4 percent in the first quarter of 2011 year-on-year with transport, industry, construction and trade as the key sectors contributing to the growth.
The 3.4 percent growth comes at a time when retail sales continued to fall in the first quarter of this year, marking a drop in purchasing power and an ongoing saving trend as consumers expect harsher times ahead. Latest figures published by the country’s Institute of Statistics show retail sales in the first quarter of 2011 dropped by 5.9 percent year-on-year and 12.3 percent compared to the final quarter of 2010.
