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14:17 POLITICS

Territorial Reform/ Berisha warns Rama: We will get Albania back on its feet

DP leader Sali Berisha has spoken about extending the dead...

Record expenditure in Europe for construction, last for machinery and equipment

2024-02-19 08:15:00, Ekonomi CNA

Albanians may be among the poorest in Europe, but they do not save at all when it comes to building, especially housing, surpassing any other country in Europe.

Eurostat data that calculates nominal spending as a percentage of gross domestic product (GDP), or what the economy produces in a year, in 2022, for Albania was 18.8% of GDP, from 11.3% which is the average of the European Union.

At these levels, Albania ranks first in Europe. From the countries of the region, we are followed by North Macedonia (13.2%), Montenegro (12.7%), Bosnia and Herzegovina 11.7% and the last is Serbia with 10.2%.

The indicator is calculated as part of Gross Fixed Capital Formation, which measures residents' investments in fixed assets. It includes engineering and residential construction as well as purchases of plant, machinery and equipment, computer software. Other INSTAT data show that in construction, residential housing dominates, with 60% of total construction expenditures.

In contrast, investments in machinery and equipment, which are necessary for the progress of enterprises as they positively affect productivity growth, are the lowest in Europe. Yes According to Eurostat. In 2022, expenditure on machinery and equipment was 4.1% of GDP in Albania, the second lowest in Europe. In Serbia, this indicator is 8.9% of GDP, in Montenegro 7.9%, in Bosnia and Herzegovina 9.5%, in North Macedonia 7.5%.

Record expenditure in Europe for construction, last for machinery and equipment

Housing construction amounts to 1.8 billion euros

Against the shrinking trend of the population and the slow growth of official income, the residential construction sector is following the activity, especially in the capital. In 2022, the area of ??building permits reached a record level in the last decade.

Although demand does not seem promising, construction companies are not backing down. According to INSTAT data, in 2022, the area granted for building permits for housing was about 1.8 million m2, the highest level on record.

Other INSTAT data, available up to 2021, show that gross fixed capital formation for residential buildings, which measures residents' investment in housing, reached 209 billion ALL (about 1.8 billion euros), which it is the highest historical level on record, surpassing 2006, when the peak of the sector's first growth cycle, fueled by massive population displacement after the 1990s, was reached.

After that, construction entered a cycle of decline, which lasted until 2016. After this year, the cycle of growth began again, this time not driven by population displacements, but by the orientation of free capital in this sector, which is among the most profitable in the economy./ Monitor.al