Industry sector in trouble, double-digit revenue decline in the second 3-month period

The devaluation of the euro in exchange for the lek, the increase in costs from the minimum wage and the curbing of demand in foreign markets has worsened the income in the industry sector.

INSTAT's data show that the income in the footwear manufacturing businesses recorded an annual decrease of 12.7 percent according to the comparison of the sales value index.

The situation was slightly more positive in clothing factories, where the value sales index recorded an annual increase of 3.2 percent in the second quarter.

Other sectors of the manufacturing industry had a sharper decline in income.

Wood production and processing factories recorded an annual decline of 12.5 percent of the value sales index in April-June 2023, and paper production and processing factories also recorded a decline in the same percentage.

Businesses in the production sector are going through a difficult period due to the drastic devaluation of the euro in exchange for the lek this year.

On one hand, losses from the exchange rate on the other, the increase in the minimum wage are making Albanian products for exports non-competitive in international markets. Losses from the exchange rate captured 10 percent of turnover in a given month of 2023, while the minimum wage from 32 thousand ALL in April 2022 reached 40 thousand ALL in April 2023.

The deterioration of the production sector also had a negative impact on employment. INSTAT data show that in the second 3-month employment in the industry sector decreased by 2.7% for the second quarter in a row. Employment in industrial businesses entered the crisis as early as the third quarter of 2022 where the decline started with 0.2 percent after an increase of about 7% throughout the year.

In addition to these difficulties, the industrial sector is suffering from a lack of manpower. Due to more difficult conditions and wages around the minimum levels, workers in the industry are moving to other sectors with higher wages.

The events after the war in Ukraine, in addition to high prices, have significantly increased production costs in Europe and many European customers are now looking to move production to other countries such as Uzbekistan, India and North Africa. This trend has caused orders to decrease in Albanian factories, causing some subcontractors in the shoe textile industry to go bankrupt./Monitor