Consumer confidence dropped ahead of campaign against informality

Consumer confidence dropped ahead of campaign against informality

 Sentiment Indicator, measuring both business and consumer confidence declined moderaly in the third quarter of 2015 when the Albanian government undertook a nationwide campaign to curb widespread tax evasion after a similar operation on electricity thefts and unpaid debts in late 2014.

A survey conducted by the country’s central bank shows Albania’s Economic Sentiment Indicator (ESI) dropped by 2.7 percentage points in the third quarter of this year, but yet remained 2 percentage points above its long-term historical average.

While the campaign in the electricity sector collecting accumulated unpaid debts is estimated to have moderately cut household consumption, the ongoing operation against informality is expected to further affect consumption because of the closure of thousands of businesses which operated informally. Experts also expect the campaign to spark an increase in consumer prices due to higher costs for previously unregistered businesses and the application of heavier fines for not issuing tax receipts.

The performance of the Economic Sentiment Indicator in the third quarter of this year was negatively affected by a drop in the industry and services sectors and a decline in consumer confidence, showed the survey.

Meanwhile, the long-ailing construction sector and trade registered a moderate confidence boost.

Prospects for the industry, construction and services sectors for the final quarter of the year appear pessimistic on lower demand and investments. Households are also pessimistic about the current financial situation and say they have cut down on big purchases while their saving rate has slightly declined.

The Albanian economy continues to be dominated by the services sector, which accounts for around 50 percent of gross value added (GVA) by main sectors, followed by agriculture with more than a fifth. Industry, comprising both manufacturing and the booming extractive industries dominated by crude oil production,  provides 15 percent of the GVA. The long-ailing construction sector has seen its share drop to about 12 percent compared to 17 percent soon after the onset of the global financial crisis in 2009.

The Albanian economy grew by 2.65 percent in the first half of this year and is on track to achieve its new revised target of 2.7 percent for 2015. However, final household expenditure, an indicator measuring consumer spending which accounts for around 90 percent of the country’s GDP, was down by 3.16 percent year-on-year in the second quarter of 2014, declining for the second quarter in a row.

The Albanian government and the IMF have recently revised Albania’s 2015 GDP growth forecast to 2.7 percent down from an initial 3 percent on lower international oil prices affecting exports and spillover impacts from the crisis in neighboring Greece.
Consumer confidence dropped ahead of campaign against informality Consumer confidence dropped ahead of campaign against informality Monday, October 19, 2015 Rating: 5
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