Exports took a nosedive in April with the clothing and footwear manufacturing sector taking the biggest hit, mainly due to a drop in orders from abroad and an increase in costs within the domestic market.
Data from INSTAT published this week found that the amount of cotton products exported during April fell by 21%, continuing the downwards trend of the last three months. As for the whole fashion and footwear sector, there was a decrease of just over 13%, following several months of increases.
The situation will worsen further in the coming months as most factories expect a reduction in orders. In addition to a lack of interest from abroad, the increase of the minimum wage of 30% within a year is also hitting hard, along with an increase in the cost of raw materials and the devaluation of the euro.
Last week, the euro fell to a historic low against the lek with an exchange rate of 110.73 lek to each euro, according to the Central Bank of Albania.
The situation was due to a large influx of euros in the market and was likely compounded due to the local elections held on May 14th.
Representatives of export businesses asked the government to take action as the rate is problematic for those exporting goods that are paid for in euros, then having to pay staff and local bills in lek. They say that many are at risk of bankruptcy if the trend continues.
On Thursday of last week, the Ministry of Finance and Economy announced short-term measures to alleviate the situation including quicker VAT refunds and the prepayment of profit tax instalments for companies meeting certain criteria.
Climate change may also play a part in the woes of textile businesses with a warm winter, there was less demand for winter shoes and many warehouses report a surplus of stock. Furthermore, cost of living crises across Europe, restricted the amount of spending in the fashion sector.
Overall, exports of all goods declined in April by 19.3% after a reduction of 11.7% in March. January of this year saw a big increase in export volumes, around 20% followed by a sharp contraction in February to just 2.8%.
According to INSTAT, given that Albania carries out most of the trade exchanges with the countries of the eurozone, the devaluation of the euro has affected the trade volume.
