The index measuring both business and consumer confidence improved by 6.5 percentage points in the final quarter of 2012 fuelled by the services and the industry sectors. Meanwhile, consumers became more pessimistic
TIRANA, Jan. 15 – Albania’s Economic Sentiment Index (ESI) measuring business and consumer confidence registered a turning point in the final quarter of 2012 ending its downward trend in the previous four quarters. The index measuring both business and consumer confidence improved by 6.5 percentage points in the final quarter of 2012 fuelled by the services and the industry sectors. Meanwhile, confidence in the crisis-hit construction sector continued negatively contributing to ESI. After slightly increasing in the third quarter of the year, consumers became more pessimistic in the final quarter of the year on worsening financial situation.
The services sector, which accounts for around 60 percent of the GDP, registered a considerable 9.7 percent increase in its confidence index after a sharp confidence drop in the third quarter of the year. The services sector confidence improved on better employment and financial situation indicators despite current demand remaining below the long-term historical average. The capacity utilization rate registered 74.1 percent, only 0.7 percent below the long-term historical average.
Confidence in the industry sector, which accounts for 12 percent of the GDP and is dominated by processing exporting businesses, improved by 1.2 percent in the final quarter of the year, ending its downward trend since the final quarter of 2011. The improvement of confidence in the industry which yet remains 7.3 percentage points below its long-term average was a result of better manufacturing and employment indicators. However, industry businesses expect manufacturing and inventory stock to drop in the first quarter of 2013.
The construction sector, which has been in crisis since 2008, registered another drop in its confidence index as demand and manufacturing registered negative rates. The confidence index in the final quarter of 2012 dropped by 5.6 percent, standing 34 percentage points below its long-term historical average.
Consumers, whose confidence index had slightly improved in the third quarter of the year, became more pessimistic in the final quarter of the year citing a deteriorating of financial situation and expectations about the country’s economic and financial performance. The central bank survey showed consumers reported a higher cost of living in the final quarter of the year.
The difficult situation consumers and businesses are facing is also indicated by government revenues and the performance of some of the key taxes. Finance Ministry data show government collected a total of 301 billion lek in the first 11 months of 2012, up only 2 percent compared to the same period in 2011 but down 6.3 percent or 20 billion lek (Euro 140 million) compared to targets it had set, affecting public investments and the deficit.
The report reconfirms the sluggish domestic consumption as indirectly shown by the performance of the value added tax and a difficult situation among businesses which are suffering a double-digit shrink in profits.
The Finance Ministry data reconfirm the stagnation of domestic consumption, which is the key driver of the Albanian economy at a time when exports’ growth has considerably slowed down due to escalating crisis in the Eurozone and especially top trade partners Italy and Greece.
The value added tax, which accounts for around 38 percent of total tax revenues, and indirectly measures consumption, grew by only 0.5 percent in the first eleven months of 2012 but was down around 7.5 percent or 8.7 billion lek compared to the set targets. The excise tax imposed on the so-called luxury goods was down by 8 percent compared to the first eleven months of 2011, revealing that Albanians have cut down on fuel, tobacco, coffee and beer consumption in these times of crisis. What’s worse, businesses continue suffering with the profit tax for the first eleven months of 2012, down by 15.9 percent.
The Albanian economy grew by an average of 1.5 percent in the first three quarters of 2012 affected by the Eurozone crisis and especially negative developments in top trade partners Italy and Greece.
