The labor market, the lost battles against informality and the dilemma of export growth

The problem with this analysis that we are presenting is that the employment trends do not match the value of exports, considering with reservations the data we received for analysis.

First, while we have an increasing value of exports for the agricultural sector, on the other hand there is a decrease in the number of employees and the share of GDP. But also, a symbolic increase in the average salary. Secondly, while in the extractive, processing, and energy industry sectors there is a decrease in the value of exports and share in GDP, it is observed that there is an increase in the number of employees, but a decrease in the average salary.

This is not data speculation.

While the inflation rate has increased during the 9th month of 2022, wage growth has slowed. The average gross salary in Albania has increased by 8.4% during the fourth quarter of 2021, marking an increase in the agriculture, fishing and forestry sector by 10.5% and the industry sector by 11.2%.

Wage data is messy, so we should take the exact numbers with a grain of salt, but the direction of change is clear. Wage growth is slowing, not accelerating. That’s not a happy story for real wages (more on that in a moment), but it does mean we’re not on the cusp of double-digit inflation.

The significant risk in this story is the actions of the Bank of Albania. Overnight interest rates are still at low levels.

Wage data is messy, so we should take the exact numbers with a grain of salt, but the direction of change is clear. Wage growth is slowing, not accelerating. That’s not a happy story for real wages (more on that in a moment), but it does mean we’re not on the cusp of double-digit inflation.

The significant risk in this story is the actions of the Bank of Albania. Overnight interest rates are still at low levels.

However, if the Bank of Albania responds to inflationary pressures and continues to rapidly raise interest rates, this will slow down the economy and push us into a recession. Furthermore, if we go into a recession and the local government changes policy direction, this could end up being long.

The current opposition sees a potential recession as the best hope of defeating Ramen in 2025 and will do all the propaganda to portray the economy as the most problematic part of the prolonged governance of the “Renaissance” political model.

For this reason, the biggest threat to the economy today comes from the recession lobby. If the policy of increasing interest rates continues, as well as that of absorbing money from citizens with treasury bonds, nothing else has been achieved but to invite the recession to come.

If not addressed through the inclusion of positive factors along with the performance of the economy with proper calculations, we may have a difficult road ahead, but it is possible to avoid recession.