The economy is growing without consumption

2024-12-25 11:37:00, Ekonomi CNA

In the third quarter, when tourism was at its peak, the final consumption of the population increased by only 0.8% compared to the same period of the previous year.

This was the weakest pace since the first quarter of 2021, when the country was in the wave of restrictions on movements abroad due to the Covid-19 pandemic.

The final consumption of the population does not confirm the boom in foreign visitors. According to INSTAT data, the number of foreign visitors exceeded ALL 11 million persons in January-November 2024 with an annual increase of 16%. But as it seems their effect on consumption has not been very high as the emigration of Albanians abroad has increased significantly. For the 11-month period, Albanians made 7.2 million trips abroad with an annual increase of 14.6%.

Businesses operating in the wholesale food trade sector claim that the type of tourist who visits our country does not consume much. Albania is marketed as "low cost" for Western countries and it is preferred to be visited by tourists with a small budget.

On the contrary, Albanians who go abroad for vacation create more damage. Albanian residents who have the opportunity to travel spend more than the average population. Due to the increase in prices in Albania this year, many Albanians chose to spend their holidays abroad, negatively affecting consumption in our country.

Indicators on economic growth are appearing contradictory. According to INSTAT, imports and retail trade increased significantly in the third quarter, but the final consumption of the population remained almost unchanged. The concentration of growth resources in some sectors has made the distribution of welfare to the needy strata inelastic. Between 2002 and 2008, in our country, economic growth of 1% of GDP was accompanied by a reduction in poverty by 1.2%, according to World Bank calculations. After 2014, the elasticity of growth deteriorated. A 1% increase in GDP resulted in only a 0.8% reduction in poverty, WB economists calculated.

The rigidity of the distribution of economic growth was clearly observed during the pandemic year, where Albania had the lowest economic decline with -3.4%, after Serbia, but, on the other hand, the number of poor people increased more than in any country other. Currently, Albania has a quarter of the population in relative poverty (6.7 USD per day).

International financial institutions have pointed out the challenges of Albania's economic model and gave suggestions on how the economy can develop a healthy growth model, which should be based on investments in human capital and education./ Monitor Magazine