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Voxpress:

Economic growth in 2023 was focused on construction and services

2024-02-01 12:26:43Biznes SHKRUAR NGA REDAKSIA VOX

Economic growth in 2023 was focused on construction and services

The economy is growing above the average of the last decade, but growth rates were concentrated in only two sectors of the economy last year, construction and services (tourism).

Analyzing the components of economic growth, the Ministry of Finance expects that the GDP of 2023 will grow by 3.5 percent (9-month = 3.25%), but the main contributors to this growth will be construction 0.7% points and services with 2.6% points (see the chart below), while the contribution of other sectors, agriculture and industry will be zero.

The concentration of economic growth reduces the distribution of benefits to the general population and the needy. The structure of economic growth shows that families whose income is linked to agriculture and industry, on the contrary, will have a deterioration, as both these sectors contribute to 60% of employment in the country.

The increase of the minimum wage 4 times within January 2022-April 2023, the strengthening of the lek, the drop in demand from abroad has put the Albanian industry in difficulties. This month, thousands of people lost their jobs after factories were unable to raise contract prices with European customers. The most affected is the fashion industry and mainly the production lines in the districts.

Also, agriculture has restrained growth rates in a stable manner, but in the last two years, the largest sector of the economy has entered a downward trend.

Official data from INSTAT showed that, in the third quarter of 2023, production in the agricultural sector fell by 0.4%, this was the biggest drop since the fourth quarter of 2021 where bad weather damaged the season's production. Also, in 2022, agriculture remained in the country count, as the country's economy grew by 4.86%.

The Ministry of Finance in the new Macroeconomic Framework predicts that during the period 2025-2027, from the point of view of aggregate supply, it is expected that all the main sectors will continue to grow more or less with the same trend of their historical average.

Specifically, agriculture is expected to grow by an average of about 2.4 percent per year in real terms during the period 2025–2027, with an average annual contribution to economic growth of about 0.4 percentage points even though the sector has been stagnant for the last three years. The industry is expected to grow at an annual average of about 4.7 percent and an average annual contribution of about 0.5 percentage points. Even this forecast on the industry is optimistic, as the largest operators within the sector do not expect a good year this year either.

Construction is expected to grow at an annual average of about 2.6 percent and an average annual contribution of about 0.3 percentage points, and services at an average annual growth of about 4.5 percent and an average annual contribution of about 2.2 percentage points.


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