Influencing sectors of economy at the GDP of 2023: Be careful with the remodeling of the new economy

According to the latest INSTAT publication on national accounts [1], “The Gross Domestic Product (GDP) in the third quarter of 2023 is estimated to increase by 3.46%, compared to the third quarter of 2022.

The following branches of economy have made a positive contribution:

Public Administration, Education and Health with +1.20 percentage points,

Real estate activities with +0.68 percentage points,

Construction with +0.45 percentage points,

Professional activities and administrative services with +0.43 percentage points,

Information and Communication with +0.26 percentage points,

Trade, Transport, Accommodation and Food Service with +0.24 percentage points,

Arts, entertainment and recreation, other service activities with +0.24 percentage points,

Financial and Insurance Activities with +0.09 percentage points.

The following  economic branches gave a negative contribution:

Industry, Energy and Water with -0.34 percentage points,

Agriculture, Forestry and Fishing with -0.17 percentage points”  

From the indicators above, it can be seen that the economy is doing well with the expenses it has incurred for public administration, as well as activities related to construction, trade and services. But the economy is not good with productive activities and mainly those related to processing and agriculture for export. This approach to the economy is also seen in the indicators of the decline in exports, by at least 10% compared to 2022[4].

In the comparison between the contributing sectors in 2023 compared to 2021, only real estate activities and tourism activities can be distinguished, which have performed better in their contribution to the economy. All other sectors have performed poorly and even financial and insurance activities have a declining impact in 2023, similar to manufacturing and construction activities.

In the comparison between the contributing sectors in 2023 and 2022, there is a high influential weight of added value from tourism and less from public administration. Meanwhile, the sectors of construction, manufacturing, extractive industry, agriculture, financial services, professions and trade have a lower impact on the gross added value of the economy in 2023 compared to the three quarters of 2022.

From the contribution of the sectors, it is seen that most of them need to review the performance through the review of the business model and productivity. On this basis, it seems that the last quarter of 2023 will not present changes in the downward trends of the sectors in the value of the development of the economy. From this stagnant situation or with a tendency of slow development and in some sectors such as production even declining, it seems to have started after the pandemic, but in fact they start to decline since 2019.

When the GDP is being affected by very few sectors of the economy and specifically by the construction sectors together with real estate, as well as by administration expenses, this requires attention for a separate analysis for each sector to see the problems of the model, the market and the need or not for intervention. Although the GDP may be increasing, but with the pace that Albania is moving in the last decade, this is an insufficient growth to provide jobs for the new generation of the labor market and entrepreneurs.

The lack of heavy industry or related industry cannot necessarily be considered a negative phenomenon of our economy. The reasons that our economy no longer operates on the basis of the heavy industry sectors and the automotive and mining industries is already a consequence of the rapid growth of the trade and service sectors, as well as some branches of manufacturing, mainly for export.

However, the change of this economic structure towards another status quo may affect the closure of the economy to the opportunities to realize investments with a long-term impact on the economy. Although tourism is being considered as the “El Dorado” of the next decade, the attention should be emphasized on its supporting sectors and of course more chances and focus should be given to them in order not to create imbalances and inequalities of opportunities and chances for the participation of the entire population. .

Meanwhile, tourism, which can enter a minefield of informality and non-sustainable market problems, needs a dedicated policy and approach towards the objective of increasing the productivity of tourism services and those related to them.

On the other hand, recognizing the fact that the service sector is less inclined to build appropriate social relations with the labor market, a re-emphasis of the role of contracts is needed based on a new social approach that requires the presence of institutions and trade unions.

[1] https://www.instat.gov.al/media/12905/pbb-tr3-2023.pdf

[2] Gross value added represents the contribution of different activities to GDP and is calculated as the difference between production and intermediate consumption

[3] Net Taxes are taxes payable per unit of certain goods and services such as Value Added Tax (VAT), excise duties, taxes and customs duties on imports.

[4] https://www.instat.gov.al/media/12880/tj-nentor2023.pdf