The devaluation of the Euro in the domestic currency exchange market, the increase in costs from the minimum wage, and the curbing of demand in foreign markets have worsened the income in the industry sector, Monitor reported on Wednesday.

INSTAT's data show that the income in the shoe manufacturing businesses recorded an annual decrease of 12.7% according to the comparison of the sales value index. The situation was slightly more positive in the clothing factories, where the value sales index recorded an annual increase of 3.2% in the second quarter.

Other sectors of the manufacturing industry had a strong decline in income. Wood production and processing factories recorded an annual decline of 12.5% 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 manufacturing sector are going through a difficult period due to the drastic devaluation of the Euro in exchange for the Lek this year.

On the one hand, the losses from the exchange rate and on the other, the increase in the minimum wage are making Albanian products for exports uncompetitive in international markets. Losses from the exchange rate captured 10% of turnover in a given month of 2023, while the minimum wage from Lek 32,000 in April 2022 reached Lek 40,000 in April 2023.

The deterioration of the production sector also hurt employment. INSTAT data show that in the second quarter, 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% after an increase of about 7% throughout the year.

In addition to these difficulties, the industrial sector is suffering from a labor shortage. 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 tendency has caused orders to decrease in Albanian factories, causing some subcontractors in the shoe textile industry to go bankrupt.