Albania: Economic and Political Overview
In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline | COVID-19 Country Response
Albania is considered a transition economy, not highly integrated into global capital flows but demonstrating strong economic performance. The country has been affected by the challenges within the Eurozone, which receives nearly 80% of its exports and serves as the largest investor in the nation. Despite maintaining positive momentum in the face of repercussions from Russia’s invasion of Ukraine, the Albanian economy showed signs of moderation in 2023, according to the International Monetary Fund (IMF), experiencing an estimated growth of 3.6% compared to the 4.8% increase recorded in 2022. Despite this slowdown, the IMF highlighted the country's economic resilience, driven by strong private consumption, a robust services sector, active construction, increased electricity production, and a surge in tourism. Looking ahead to 2024, the IMF projects a further slowdown in growth to 3.3%, still driven by robust private consumption and further boosts from tourism and construction.
Albania's government has undertaken significant fiscal consolidation efforts in the aftermath of the pandemic. This includes notable improvements in collecting value-added tax. Consequently, the country achieved a zero primary balance-to-GDP ratio in 2023, exceeding the government's fiscal rule of a non-negative primary balance one year earlier than planned. The IMF anticipates limited additional fiscal consolidation in the medium term. The 2024 budget aims for a small primary surplus, indicating continued responsible fiscal management. Despite the slowdown in economic growth, public debt remained around 62.9% at the end of 2023 and is projected to be sustainable in the medium to long term (estimated at 59.7% by 2025). Inflation, which hovered around 4.8% in 2023 due to tight labor markets, is expected to gradually decrease, reaching the central bank's target of 3% by early 2025 (IMF). The central bank itself remains more optimistic, anticipating a return to the 3% target by mid-2024.
The unemployment rate was estimated at around 11% in 2023 by the IMF and is expected to remain relatively stable over the forecast horizon. The National Employment and Skills Strategy implemented by the government aims to strengthen vocational training, upskilling, and inclusion. Increased public service digitalization, financial inclusion, and labor inspections have benefited the business environment and the formalization of the economy. However, a large share of GDP (estimated at around 50%) is still accounted for by the informal economy, which hinders the economic reform agenda.
| Main Indicators | 2022 | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) |
|---|---|---|---|---|---|
| GDP (billions USD) | 19.08 | 22.74 | 25.43 | 26.91 | 28.69 |
| GDP (Constant Prices, Annual % Change) | 4.8 | 3.3 | 3.1 | 3.4 | 3.5 |
| GDP per Capita (USD) | 6,658 | 7,957 | 8,924 | 9,474 | 10,135 |
| General Government Gross Debt (in % of GDP) | 65.5 | 60.0 | 58.0 | 57.0 | 56.5 |
| Inflation Rate (%) | 6.7 | 4.8 | 3.5 | 3.0 | 3.0 |
| Unemployment Rate (% of the Labour Force) | 11.1 | 11.0 | 11.0 | 11.0 | 11.0 |
| Current Account (billions USD) | -1.14 | -0.84 | -0.96 | -1.11 | -1.12 |
| Current Account (in % of GDP) | -6.0 | -3.7 | -3.8 | -4.1 | -3.9 |
Source: IMF – World Economic Outlook Database , Latest available data
Note: (e) Estimated Data
Agriculture is an important sector for the Albanian economy. It contributes 18.6% of the GDP and employs 35% of the workforce (World Bank, latest data available). Agricultural production concentrates on wheat, corn, oats, potatoes, vegetables, olives, tobacco, fruits, sugar beets, vines, livestock farming and dairy products. The agriculture sector in Albania suffers from a lack of modern equipment, highly fragmented land ownership and limited area of cultivation, all of which lead to relatively low productivity. The productive capacity of Albania’s agriculture sector meets only one-third of the domestic demand for food and feed (World Bank); 42.8% of its territory is classified as agricultural land (1,17 million ha) and 28.7% are forests; source: FAO). Finally, it should be noted that agricultural production is higher than its share of the GDP: a large part of the produce is in fact consumed by the farmers themselves and therefore is not marketed. Data from INSTAT shows that agricultural growth is projected to average approximately 2.4% annually in real terms between 2025 and 2027, making an average annual contribution to economic expansion of roughly 0.4 percentage points.
The industrial sector accounts for 21.4% of the country's GDP and employs 21% of the active population. It is characterized by a diverse range of industries, with key sectors including textiles and clothing, minerals, energy, and food processing. Textiles and clothing production have historically been significant contributors to the economy, leveraging the country's skilled workforce and competitive labor costs. Albania also possesses substantial mineral resources, particularly chromium, which has been a cornerstone of its industrial output. Energy production, notably hydroelectric power, holds considerable potential for growth and investment. Additionally, food processing represents a growing sector, benefiting from Albania's rich agricultural resources. Emerging industries include technology and manufacturing, as the country seeks to diversify its industrial base and attract foreign investment. The manufacturing sector’s value-added is estimated to contribute to nearly 7% of the country’s GDP (World Bank).
The services sector represents 47.4% of the GDP, employing around 44% of the workforce. Tourism is an important sector of the economy: after being severely affected by the COVID-19 pandemic, foreign tourist arrivals to Albania rose to over 10.1 million in 2023 (+35% year-on-year – Ministry of Tourism). According to the latest figures by the European Banking Federation, the structure of the banking and financial system consists of 12 banks (four of which with Albanian capital and eight with foreign capital), 30 non-bank financial institutions (NBFIs), 538 foreign exchange bureaus, 14 savings and loan associations (SLAs) and one union of SLAs.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
|---|---|---|---|
| Employment By Sector (in % of Total Employment) | 34.6 | 21.6 | 43.8 |
| Value Added (in % of GDP) | 18.6 | 21.4 | 47.3 |
| Value Added (Annual % Change) | 0.1 | 7.7 | 6.2 |
Source: World Bank - Latest available data.
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| Monetary Indicators | 2016 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|
| Albanian Lek (ALL) - Average Annual Exchange Rate For 1 MUR | 3.49 | 3.45 | 3.18 | 3.10 | 2.76 |
Source: World Bank - Latest available data.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
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Albania’s foreign trade represents 85% of its GDP and is primarily conducted with Europe (World Bank, latest data available). The country mainly imports machinery and equipment, minerals and metals, textiles and clothing, petroleum products, foodstuffs, and chemicals. In 2022, Albania's exports primarily consisted of minerals, textiles and footwear, agricultural products, metals, and energy products. Minerals, especially chromium ore, represent a significant portion of Albania's exports, leveraging its rich natural resources.
In terms of country, in 2022, the main export partners were Italy (49.5%), Serbia (10.2%), Montenegro (7.9%), Greece (6.8%), North Macedonia (5.5%), and Spain (4.4%); whereas imports came chiefly from Italy (23.4%), Turkey (12.0%), Greece (10.1%), Serbia (6.3%), and Germany (4.6% - data from Comtrade). Albania sourced 51.6% of its imports from the EU in 2022, while 76% of its exports were destined for EU countries.
Albania's trade balance is structurally in deficit, mainly because exports are neither sufficiently diversified nor competitive in terms of price, and because of the country’s narrow production base. In 2022, merchandise exports reached USD 4.3 billion (+21% y-o-y), while imports increased at a slower pace (8.8%), reaching USD 8.4 billion. However, the country is a net exporter of commercial services, which amounted to USD 5 billion against USD 2.5 billion in imports (+21.9% and +25.9% y-o-y, respectively - data from WTO). According to the World Bank, the country’s trade deficit stood at 10.4% of its GDP. Data from the Institute of Statistics indicates that Albania’s exports fell by 9.5% to ALL 440.3 billion, while imports declined by 8.2% to ALL 872.6 billion.
| Foreign Trade Indicators | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|
| Imports of Goods (million USD) | 5,897 | 5,570 | 7,718 | 8,399 | 8,613 |
| Exports of Goods (million USD) | 2,716 | 2,506 | 3,559 | 4,309 | 4,324 |
| Imports of Services (million USD) | 2,394 | 1,343 | 1,996 | 2,513 | 3,477 |
| Exports of Services (million USD) | 3,808 | 2,552 | 4,117 | 5,019 | 7,193 |
| Imports of Goods and Services (Annual % Change) | 2.3 | -19.8 | 31.5 | 13.1 | n/a |
| Exports of Goods and Services (Annual % Change) | 2.6 | -27.9 | 52.0 | 7.5 | n/a |
| Imports of Goods and Services (in % of GDP) | 45.0 | 37.2 | 44.7 | 47.8 | n/a |
| Exports of Goods and Services (in % of GDP) | 31.3 | 22.7 | 31.3 | 37.5 | n/a |
| Trade Balance (million USD) | -3,517 | -3,420 | -4,514 | -4,467 | n/a |
| Trade Balance (Including Service) (million USD) | -2,103 | -2,210 | -2,392 | -1,960 | n/a |
| Foreign Trade (in % of GDP) | 76.3 | 59.8 | 76.0 | 85.3 | n/a |
Source: WTO – World Trade Organisation ; World Bank , Latest Available Data
| Main Customers (% of Exports) |
2022 |
|---|---|
| Serbia | 10.2% |
| Montenegro | 7.9% |
| Greece | 6.8% |
| North Macedonia | 5.5% |
| Spain | 4.4% |
| See More Countries | 65.1% |
| Main Suppliers (% of Imports) |
2022 |
|---|---|
| Türkiye | 12.0% |
| Greece | 10.1% |
| Serbia | 6.3% |
| Germany | 4.6% |
| China | 4.2% |
| See More Countries | 62.8% |
Source: Comtrade, Latest Available Data
Source: Comtrade, Latest Available Data
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| 4.4 bn USD of services exported in 2022 | |
|---|---|
| 68.36% | |
| 12.20% | |
| 11.89% | |
| Miscellaneous business,...Miscellaneous business, professional, and technical services | 11.89% |
| 3.76% | |
| 1.31% | |
| 0.93% | |
| 0.66% | |
| 0.56% | |
| 0.30% | |
| 0.04% | |
| 2.5 bn USD of services imported in 2022 | |
|---|---|
| 73.84% | |
| 12.59% | |
| 3.98% | |
| Miscellaneous business,...Miscellaneous business, professional, and technical services | 3.80% |
| Research and developmentResearch and development | 0.19% |
| 2.52% | |
| 2.52% | |
| 1.84% | |
| 1.26% | |
| 0.75% | |
| 0.45% | |
| 0.25% | |
Source: United Nations Statistics Division, Latest Available Data
- Socialist Party (PS): centre left, social democracy, pro-Europeanism
- Democratic Party (PD): centre right, conservative, it is the main opposition party
- Republican Party: right, conservative
- Party for Justice, Integration and Unity: right-wing, nationalist
- Social Democratic Party (PSD): centre left, supports the Socialist party government
- Legality Movement Party (PLL): focuses on legal reform and democratic principles
- Environmentalist Agrarian Party (PAA): environmental protection and agrarian issues
- Movement for National Development (LZHK): centre-right
- Unity for Human Rights Party (PBDNJ): represents the rights and interests of minorities and marginalized groups
The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
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Latest Update: April 2024
