Retail sales grew by a mere 0.2 percent in the third quarter of 2012 after shrinking by 8.3 percent and 1.2 percent respectively in the first and second quarters
TIRANA, Dec. 26 – Stagnating retail sales hint the Albanian economy has not made much progress in the third quarter of the year after growing by an average of 1 percent in the year’s first half. Data published by the country’s Institute of Statistics this week show retail sale ended their negative growth rates in the third quarter of 2012 when they grew by a mere 0.2 percent year-on-year and 10 percent compared to the previous second quarter. INSTAT did not publish employment rates in the retail sales sector which has been shrinking for several quarters.
INSTAT reports the volume of sales in the “Trade, maintenance and repair of cars and motorcycles” in the third quarter of 2012 rose by 2.4 percent year-on-year and 25 percent compared to the previous second quarter.
In the first and second quarters of the year, retail sales dropped by 8.3 percent and 1.2 percent respectively.
The retail sales results confirm the sluggish domestic consumption, the key driver of Albania’s economic growth, also indirectly unveiled by the performance of the value added tax. Finance Ministry data show the value added tax, which accounts for around 38 percent of total tax revenues, and indirectly measures consumption, grew by only 1.7 percent in the first ten months of 2012 but was down around 6.8 percent or 7 billion lek compared to the set targets. Meanwhile, investments and government spending, two other components calculating the GDP remain sluggish. Facing crisis impacts, both businesses and consumers have cut down on investments. Lending standards also remain tight as bad loans stand at a record 22 percent. Hit by a slowdown in revenues, government has also cut public investments. At 44 billion lek for the first ten months of this year, public investments were 15.3 percent lower compared to the same period in 2011 and 12.2 percent lower compared to the 2012 targets. The Eurozone crisis has also hit Albanian exports which in the first 10 months of 2012 grew by only 7 percent.
Grim prospects
After the slight shrink in the first quarter of 2012, the Albanian economy returned to growth in the second trimester driven by progress in the industry and post-telecommunication sector which overcame their negative growth rates. A report published by the country’s Institute of Statistics, INSTAT, shows the Albanian economy grew by 2 percent year-on-year in the second quarter of 2012 after the 0.2 percent shrink registered in early 2012 when severe weather conditions paralyzed the country.
With an average growth rate of 0.9 percent during the first half of this year, the Albanian economy is reflecting clear signs of crisis from the Euro area partners and developments at home where domestic consumption and exports remains sluggish, and public debt beyond the legal ceiling of 60 percent of the GDP poses a real threat. Government reviewed GDP growth target at 3 percent for 2012 will be achieved only if the country registers high growth rates of 5 percent for the third and fourth quarters of this year which under crisis circumstances seems an impossible challenge.
The growth rates for the first half of 2012 are in line with forecasts by international financial institutions such as the IMF and the World Bank which expect the Albanian economy to grow between 0.5 to 0.8 percent this year, citing impacts from Eurozone crisis and public debt.
Undertaking supporting policies to increase foreign direct investments and closer cooperation between banks and businesses to boost lending are two of the measures government should target to increase domestic consumption, whose poor performance in 2012 is severely affecting Albania’s economic growth, says central bank governor Ardian Fullani.
“The curb of consumption as a reaction to the country’s future economic insecurity could turn into a spiral of reciprocal impacts among macro-economic indicators in Albania. The shrink in consumption is accompanied with a drop in domestic demand leading to a slowdown in economic growth and a decrease in household income at a next stage,” says governor Fullani.
Low inflation pressures have allowed the Bank of Albania to cut the key interest rate by 1.25 percentage points to a historical record low of 4 percent since Sept. 2011 in an effort to stimulate the economy but the moves have been poorly reflected in boosting lending or increasing investments.
