Economy and citizen confidence index in May 2024 and the government’s response based on their feelings

According to the Business and Consumer Confidence Survey (BCCS)[1], for the month of May 2024, reported by the Bank of Albania[2], it is stated that “The Economic Sentiment Indicator[3]] in May 2024 marked a slight decline or improvement of the previous two months affected by lower levels of confidence in the industry, construction and consumer sectors.

The decline in industry confidence[4] was influenced by lower estimates for current industrial production. Business estimates for the level of orders in general registered a slight decline. On the other hand, businesses expect industrial production to increase in the future.

The decline in confidence in construction was largely determined by declining estimates for current construction activity. On the other hand, current orders are estimated to increase. Expectations for the prices they will set in the future have registered a slight increase this month.

The increase in confidence in services and trade continues for the third consecutive month (March – May), where its level currently stands above the historical average. The more optimistic assessments of businesses for the current progress of their activity and for the current level of demand contributed to the increase in confidence. Also, expectations for demand and the level of employment in the future have increased this month. Businesses have revised downward the future price performance.

The decline in consumer confidence after the last two months with a slight increase in confidence was influenced by the assessment of their financial situation and the economic situation of the country for the future as being weaker, as well as weak confidence in the future for purchases in large amounts. Consumers’ expectations of future unemployment have increased.”

If we compare it with the economic sentiment, based on the VBBK of the month of May 2023 of the Bank of Albania, it can be seen that “The economic sentiment indicator in May 2023 marked a significant increase for the seventh month in a row (starting from November 2022). The increase in confidence in the economy was influenced by the increase in confidence in the industry, construction, service and trade sectors, but with a slight decrease in consumer confidence.”

But what does it mean for the economy and the citizen and how does the situation look if we compare it to the same period last year?

In this comparison, we will also have to report the indicators that are already known about inflation, the economy and unemployment, to understand according to their role and the effect they have on citizen (consumer) trust and on the economy.

From what can be seen, the situation in the first 5 months of 2024 is sufficiently less reliable than in 2023.

First, according to the indicators in the first half of 2023, we note that:

– Economic growth in the first 3 months of 2023 was 2.72%, while in the second 3 months it increased by 0.4% compared to the previous quarter[5].
– Economic growth by sector in the first quarter of 2023 was higher in construction, real estate and tourism, while in the second quarter it was significantly in construction, real estate and less in  tourism[6].
– Employment increased by 4.4% in the first quarter of 2023 and in the second quarter it increased by 2.7%[7].
– Unemployment in the first quarter was 10.8% and in the second quarter it was 10.7%.
– Revenues grew at an accelerated rate during, in total 16.2 billion ALL more than 2022.
– Debt to GDP was 63.27% of GDP at the end of the first quarter of 2023.
– For inflation, the 4-month amount in 2023 was 2.9%.

Secondly, according to the indicators for the first 4 months of 2024, we note that:

– The expectation for economic growth in the first quarter is 3.3%
– Economic growth is expected to be driven by almost the same sectors as in 2023, but at a lower level for construction and higher for real estate and tourism
– The total income for the 4-month period of 2024 increased by about 1 billion ALL more than the 4-month period of 2023.
– Debt to GDP was 55.75% of GDP at the end of Q1 2024.
– For inflation, the 4-month amount in 2023 was 1%.

In a comparison between the economic and consumer sentiment indicators related to the economy and the personal budget for the 5th month of 2023 and 2024, it is seen that the confidence in the production (industry) as a whole both for domestic and for export has a continuous decline and is very different in downward perception from 2023.

Similarly, confidence in the construction sector, which is the locomotive of the Albanian economy, has a decline in business confidence in 2024 and is with an obvious downward trend compared to 2023.

It remains that the Albanian economy in almost the first half of 2024 is based on confidence similar to the 5-month 2023 for services and trade.

Meanwhile, we see the citizens’ confidence in their consumption for the 5-month 2024 with the same negative trend that accompanied the same period in 2023.

[1] by asking a random sample of consumers questions about current economic conditions and expected future conditions

[2] https://www.bankofalbania.org/rc/doc/Vrojtimi_i_Besimit_te_Biznesit_dhe_te_Konsumat_2024_3_qershor_27427.pdf

[3] Economic Sentiment indicator is built based on the same balances that are used to build the confidence indicator for each sector (industry, construction, services, trade and consumers), aiming to capture the activity of the economy in the country. Before aggregating this indicator, these balances are standardized and weighted

[4] Confidence Indicator is constructed for each sector and is calculated as a simple average of the seasonally adjusted balances of the indicators, which have the highest correlation with the reference series (series of real economic data).

[5] https://altax.al/rritja-ekonomike-ne-tremujoret-e-vitit-2023-ne-oecd-be-dhe-ballkan/

[6] https://altax.al/sektoret-ndikuese-ne-pbb-ne-e-2023-kujdes-me-rimodelimin-e-ekonomise-se-re/

[7] https://altax.al/statistikat-per-punesimin-dhe-pagen-mesatare-ne-tremujorin-e-dyte-2023-ne-syrin-e-fiskalistit/