Headline Verdana Bold - Your Vision - Forecast for 2021 Deloitte Albania Tirana | February 2021
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Headline Verdana Bold Your Vision - Forecast for 2021 Deloitte Albania Tirana | February 2021
How did COVID-19 pandemic impact business activity in Albania? What do business owners think about
the future economic growth of their companies in 2021 and ongoing? What would be the strategy of
companies in the following year or in the near future? Where would businesses invest in the near future?
Deloitte aims to highlight the judgments and perceptions of market players on the post-COVID
performance of businesses and the economy in the near future.
This report presents perceptions of company executives on the future performance of businesses after
the impact of the pandemic in Albania.
“Your Vision - Forecast for 2021” was based on a survey completed by 123 company executives of
companies operating in Albania. Participant companies vary in sector, age and size.
Deloitte Albania sh.p.k Your vision - Forecast for 2021 2Economic Insights
GDP Trends
GDP growth in 2021 GDP Trends
Albania’s economy was hit hard in the last fourteen months, first by
7.5% an earthquake in November 2019 and then by the COVID-19
EIU
pandemic, owing to the lockdowns imposed in March domestically
and across Europe. According to INSTAT, real GDP contracted by
7.2% year on year in the third quarter of 2020.
IMF 6.1%
EIU forecasts real GDP growth to accelerate sharply in 2021, at
7.5% and return to pre-crisis levels in 2022. The International
EBRD 4.5% Monetary Fund (“IMF”) expects Albania's real GDP growth in 2021
to reach 6.1%, while the European Bank for Reconstruction and
Development (“EBRD”) foresees a 4.5% GDP growth.
All respondents 1.0%
Survey According to the “Your Vision - Forecast for 2021” survey conducted
Respondents expecting
by Deloitte, businesses of various sectors forecast an average GDP
positive growth
3.5% growth of 1.0% in 2021 (average of the whole pool of respondents).
Nearly more than 50% of the respondents indicated a slowdown
and/or stagnation of the economy in the upcoming year, while the
remaining (42%) indicated an average growth of 3.5%.
GDP Forecast for 2021 by survey respondents
Growth by 1 — 4%
26%
No growth to be 19% Note: EIU, IMF, EBRD provide updated forecasted data considering
registered (stagnation)
and analyzing every key event and critical factor affecting the
economy growth such as government expenditure, foreign direct
investments etc., while survey respondents make their predictions
42% Growth by 1-10%
focusing only on their year-on-year progress, taking into account
81%
factors that are mainly company specific.
Growth by 5 — 10%
32% Decline by 1-3%
Deloitte Albania sh.p.k Your vision - Forecast for 2021 3Economic growth
Business activity expected growth in 2021
Business activity expected growth in 2021 by Business activity growth in 2021
7.1%
sector Based on the availability of forecasted public data, -15.0% -5.3%
for comparison purposes the surveyed companies
4.8% and the subgroups they belong to, are grouped in
4.4%
two main economic sectors: Industry and Services*.
3.0% Economic growth in 2020 Economic growth in 2020
2.3%
2.7% The graphs represent the changes between Industry Sector (EIU) Services Sector (EIU)
1.7% respondents expectations and international data
0.8% providers (EBRD, EIU, IMF etc.). The growth in 2021
0.5% 0.5%
0.1% (as recovery year) indirectly represents the
perceived contraction in 2020 (i.e. while respondents
Other Non-FSI
Telecom & Media
Manufacturing &
FSI
Heavy Industry
Other Services
Energy
Consumer
Goods & Retail
Construction
& Real Estate
Tourism
Healthcare
IT & Tech
in the survey perceived a decline by 5.6% of the -5.6% -5.4%
industry sector, the international institutions
estimate a higher shrink by 15.0%, which also is
reflected in the recovery rates for 2021, respectively
2.0% and 20.0%).
Economic growth in 2020 Economic growth in 2020
Industry Sector (Survey) Services Sector (Survey)
Growth between 0-3% Growth Growth When forecasting the economic growth in Albania,
between between EIU takes into consideration several macroeconomic
Note: In blue, sectors classified under Industry. In green, sectors 4-6% 7-10% factors (e.g. government spending, reconstruction Expected growth in 2021
classified under Services.
after the earthquake in November 2019 etc.), while
the information of surveyed executives is perceived 20.0%
According to the perceptions of executives on the future perfor- in micro level. Therefore, companies’ activity
mance of their respective companies after the impact of the decrease in 2020 due to COVID-19 and consequently
pandemic, on average, an activity growth is expected in all sectors. the expected growth in 2021 (recovery) is conceived
lower by business owners than the predicted levels
by EIU.
4.7%
2.0% 2.7%
*Energy, Manufacturing & Heavy Industry and
Construction & Real Estate are classified under
EIU Survey
Industry, and all the remaining survey sectors are
categorized as Services. Industry Services
Deloitte Albania sh.p.k Your vision - Forecast for 2021 4Economic growth
Business activity expected growth for the upcoming 3-5 years
Business activity expected growth for the upcoming Business activity growth for the upcoming 3-5 Expected economic growth for the
3-5 years by sector years upcoming 3-5 years
8.8% 9.0% 9.5% According to the EIU, trade is forecasted to recover 8.9%
8.4%
7.5% 7.8% 7.8% 8.3%
and tourism is expected to start approaching its
7.3%
5.8% 6.0% 6.5%
pre-crisis levels in Albania, as the global economy
emerges from the pandemic. The influx of funds for
reconstruction efforts is expected to fuel sharp rises in
fixed capital investment, which is projected to account
for half of the growth during 2021-2022. Once the 3.9%
3.7%
earthquake-recovery projects begin to wind down, the
Manufacturing &
Other services
Heavy Industry
FSI
Other Non-FSI
Telecom & Media
Consumer
Goods & Retail
IT & Tech
Energy
Construction
& Real Estate
Tourism
Healthcare
economy is expected to settle back to levels close to
its average rate of growth 3.3% per year in 2023-25.
Household consumption is forecasted to be the main
driver of growth as unemployment falls and wages
continue to rise. EIU Survey
Industry Services
Growth Growth between 7-10% Regarding growth expectations (considering only
between
4-6%
respondents expecting positive growth) respondents
forecast an activity growth of 4-10% in the upcoming
Note: In blue, sectors classified under Industry. In green, sectors
classified under Services. 3-5 years.
Growth expectation (Respondents Vs EIU)
For both respondents and EIU projections, the
economic growth in 2021 is expected to reflect the
recover of the sector decline in 2020.
Sector 2020 2021 2022-2025 Average
Respondents Even though survey respondents predictions differ
Industry (5.6%) 2.0% 8.9% 1.8% from third parties forecasts on yearly basis,
considering growth expectation during
Services (5.4%) 2.7% 7.3% 1.5%
2020-2025, on average, respondents and EIU
EIU
projections tend to converge.
Industry (15.0%) 20.0% 3.9% 3.0%
Services (5.3%) 4.7% 3.7% 1.0%
Deloitte Albania sh.p.k Your vision - Forecast for 2021 5Economic growth
Business activity in 2021 compared to pre-pandemic period (2019)
Decline in activity in 2020 (COVID-19 impact) The required revenue growth in 2021 for companies to reach
the same level as in 2019 (approx. COVID-19 impact)
8.3% 8.5%
7.7% 26.2% INSTAT
6.5% 7.2%
7.1%
5.4% 5.8%
4.1% 4.4% 4.6%
2.4%
6.7% 5.1% Respondents
Energy
Telecom & Media
Other services
Manufacturing &
FSI
Tourism
Other Non-FSI
Consumer
Goods & Retail
Construction
& Real Estate
IT & Tech
Heavy Industry
Healthcare
Construction & Real Estate FSI
Note: Company executives estimation on activity contraction in 2020 due to COVID-19 can be lower
than what third parties suggest, therefore impacting their perception about the required growth in
2021 for the company to reach the same level as in 2019. INSTAT provides data considering and
analyzing every key event and critical factor affecting the economy growth such as government
expenditure, foreign direct investments etc., while survey respondents make their predictions Growth Growth between 4-6% Growth between 7-10%
focusing only on their year-on-year progress, taking into account factors that are mainly company between
specific. Due to data limitation, Construction & Real Estate and FSI are the only sectors included in 0-3%
the above comparison.
Note: In blue, sectors classified under Industry. In green, sectors classified under Services.
The required growth in 2021 for companies to reach the same level as pre-pandemic period (2019)
Based on INSTAT data about GDP at constant prices of the previous year according to Economic Activity, Construction & Real Estate sector experienced a similar contraction as
the one perceived by survey respondents. However, FSI sector experienced a significantly higher decline than the one claimed by company executives of the pool of respondents
in the survey.
Total arrivals of foreign citizens declined by an average of 57.1% in the first eleven month of 2020, compared to the same period in 2019, due to COVID-19. However,
businesses in Tourism sector expect an average 5.8% growth in activity to reach the pre-pandemic level.
According to survey respondents, on average, there is no sector that will recover from economic slowdown caused by COVID-19 pandemic in 2021. The required growth for
the companies to reach the same level as in 2019 is expected to be achieved in 2022-2025 for all sectors. Even though, the respondents outlook is more conservative in terms
of recovery speed, overall the recovery period converges with the international data providers.
Deloitte Albania sh.p.k Your Vision
Vizioni Forecast for për
juaj - Parashikimi 20212021 6Economic growth
Business activity expected growth in 2021 – by age & size
Companies expected growth in 2021 by age Companies expected growth in 2021 by size
(years active in the market) (number of employees)
1.5%
1.9%
0.9%
3.7%
1.5% Too big to fail
2.2%
4.3% Start ups
2.8%
0-2
3-5 1-30
6-10 81+
11-20 31-80
21+
Economic growth in 2021 by company age Economic growth in 2021 by company size
Recently created companies with 2 years of activity or less expect the highest The impact of the pandemic has spread into financial markets, with further
activity growth by 4.3% in 2021. Start-up companies are the most affected by reduced confidence and credit. This affects both larger and smaller firms.
the economic slowdown caused by the COVID-19 pandemic, therefore they Smaller businesses are more resilient and flexible to cope with the
expect the highest growth in 2021. disequilibrium caused by financial crisis. On the other hand, large sized
Meanwhile companies established before 2014 forecast an average growth lower companies are perceived as “too big to fail” despite economic shocks.
than 2% in sales.
Companies with more than 21 years of activity have a steady position in the
market and their growth goes in line with macroeconomic factors of the country
like GDP growth and inflation.
Deloitte Albania sh.p.k Your Vision
Vizioni Forecast for për
juaj - Parashikimi 20212021 7Company Strategy
Strategy for the future
Company strategy in the near future Main investments in the near future
56%
90% 50% 50% 47%
79% 78% 44% 43%
75%
68% 67% 64% 38%
63%
50% 30% 29%
25% 22%
20% 20% 20%
14%
20%
13% 11%
Manufacturing &
Manufacturing &
Energy
Heavy Industry
Construction
& Real Estate
Turizmi
Construction
& Real Estate
IT & Tech
FSI
Telecom & Media
IT & Technology
Heavy Industry
Construction
& Real Estate
FSI
Healthcare
Consumer
Goods & Retail
Healthcare
Consumer
Manufacturing &
Goods & Retail
FSI
Heavy Industry
Tourism
Energy
FSI
Telecom & Media
Consumer
Manufacturing &
Goods & Retail
Heavy Industry
Energy
Consumer
Goods & Retail
Healthcare
Local market expansion Regional/ international Products/Services Market Exit - Long Term Assets 14% Staff Technology All of them None of them
market expansion diversification sale of the business
23% 30% 9%
Company strategy in the near future Main investments in the near future
Regarding company strategy outlook, 68% of Consumer Goods & Retail sector is focused In line with product/service diversification strategy, FSI is the sector most focused in
on local market expansion, while 90% of Manufacturing & Heavy Industry is focused on technological investments.
Regional/international market expansion. The pandemic has put a spotlight on countries whose health services have appeared
Product/Services diversification strategy is expected to be followed by 79% and 78% of vulnerable to cope with the COVID-19 crisis. A higher level of health spending is therefore
companies in FSI and Telecom & Media sectors, respectively. As a result of the pandemic, expected. Hence, 56% of the companies in Healthcare sector, tend to invest in all segments
online payments are becoming a trend in order to prevent human contact, so banks and simultaneously.
other financial institutions are adopting their services to meet their clients demand.
Furthermore, social distancing gives rise to a higher online communication. Therefore
businesses in Telecom sector have to come up with new products and services that
satisfy consumers digital needs.
Deloitte Albania sh.p.k Your Vision
Vizioni Forecast for për
juaj - Parashikimi 20212021 8Contact Kreshnik Robo Denada Dosti Partner | Financial Advisory Assistant Director | Financial Advisory krobo@deloittece.com ddosti@deloittece.com Deloitte Albania sh.p.k Your Vision - Forecast for 2021 9
Disclaimer: This teaser is provided for informational purposes only. Deloitte makes no representation or any other form of assurance as to the accuracy or completeness of this document. Deloitte has no obligation to update, modify or amend this document or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. This document does not represent an investment advise. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.al/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. © 2021 Deloitte Albania & Kosova
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