TIRANA, Nov. 11 – Uncertainty among Albanian households has increased during the past year but slightly dropped for businesses, a survey by the country’s central bank has found.
“During 2015, an environment characterized by a low level of uncertainty among businesses supported the increase of investments in the economy. On the contrary, a rising trend of uncertainty among consumers was reflected on a drop in private consumption. The increased uncertainty has mainly affected the consumption of durable goods whose demand is more elastic and can be delayed,” says the central bank in its study.
IMF research has shown that when faced with high uncertainty, firms reduce investment demand and delay projects as they gather new information, because investment is often costly to reverse. The response of households to high uncertainty is similar to that of firms. They reduce their consumption of durable goods as they wait for less uncertain times. On the supply side, firms’ hiring plans are also negatively affected by higher uncertainty, reflecting costly adjustment of personnel.
