The increase in costs and the fall of the euro lead the processing industry to a nosedive

2024-04-05 07:51:00, Ekonomi CNA

The increase in costs and the fall of the euro lead the processing industry to a

The country's two main productive sectors, industry and agriculture, the biggest contributors to employment, saw sharp declines last year, signaling a consequential transition to services.

Data on economic growth in 2023 showed that the manufacturing industry recorded an annual decline of 6.1%, the strongest of the decade since 2012.

The manufacturing industry is mainly focused on production for export and is represented by the automotive industry, the clothing and footwear industry, and the food industry.

The industrial sector, which was booming until mid-2022, reversed a decade of gains from the devaluation of the euro and a drop in foreign demand after the war in Ukraine.

Large factories are surviving, while small processing units with up to 130 employees are closing in droves this year.

The factories claim that the main factor is related to the drop in profits, created by the exchange rate. The euro was exchanged at an average of 108.7 Lek in 2023, decreasing in the summer to close to 100 Lek, from 118 Lek which was the average of 2022.

The increase in costs and the fall of the euro lead the processing industry to a

Exporters claimed that the costs of the falling euro have eroded business profits, as they cannot be passed on in prices. In the same period, the minimum wage reached 40,000 ALL in the first quarter of 2023, from 34,000 ALL in 2022.

On the other hand, foreign orders for clothing and footwear fell sharply in 2023 after strong post-pandemic demand in 2021. The war in Ukraine and the high inflation it created affected the decline in consumption of other non-essential items.

Factories claim that this crisis, the strongest in 15 years, has put businesses in front of difficult solutions. Small units are closing down and moving to other sectors such as tourism, real estate activities and the food industry, while large factories are adapting, moving to higher production segments and cutting internal costs through increased productivity.

The most vulnerable seem to be the employees, who have spent more than 20 years sewing shoes and find it difficult to adapt to other sectors.

INSTAT data show that in the shoe manufacturing factories, about 20,000 people were employed in 2022, but data from the industry show that a large part, more than 40% of them, have lost their jobs in recent months./ Monitor.al