Factory crisis, production costs increase, export prices fall

The production sector and especially factories have entered a cycle of crisis, which is being fueled by negative developments inside and outside the country.

Official data from INSTAT show that production costs have increased for the processing industry sector in general since the production of food, clothing, etc. in the first quarter of 2024 compared to the first quarter of 2023.

But on the other hand, for many branches of industry in the same period, export prices have decreased, or increased less than production prices.

Rising costs at rates higher than export prices reduce factory revenues and profits.

According to INSTAT data, in the first quarter of 2024, domestic production prices increased by 4.4 percentage points, but export prices in the same period increased by only 0.7%.

According to INSTAT, in the first quarter, production prices in the food industry recorded an annual increase of 6.2 percentage points in the first quarter, but in the same period, export prices increased by only 2.6%.

In textile factories, production prices recorded an annual increase of 1.6% in the first quarter, but on the other hand, export prices for the same period suffered an annual decrease of -1.6 percentage points.

Output prices in the paper manufacturing industry increased by 5.1%, but export prices increased by only 0.2 percentage points from the first quarter of 2023 to the first quarter of 2024.

The electricity sector has the highest deterioration between production costs and export prices.

INSTAT data show that in the first quarter of 2024, electricity production prices experienced an annual increase of 12.3 percent, while export prices for the same period fell by -3.8 percent.

Last year, the economy accelerated the shift from manufacturing to services. The fall of the euro, the increase of the minimum wage, the weak demand from abroad are leading many factories to bankruptcy, while our economy is increasing its dependence on imports.

During 2023, the industry recorded a decline of 8.2%, the largest since 2020, when the entire world was blocked by the Covid-19 pandemic. On the other hand, an increase in the service sector was observed due to the high flow of tourists.

But economic experts and businesses think that the orientation of the economy from production to services is not a safe and sustainable step.

On the other hand, the industry is in a difficult situation, as it is losing the advantage of the free arm of the workforce and is being hit by the devaluation of the euro./ MONITOR