Economic and Political Overview

flag Albania 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

 

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Albania is a transition economy, not highly integrated into global capital flows but showing strong economical performances. The country has been impacted by the difficulties of the Eurozone, which is the destination of almost 80% of its exports and the largest investor in the country. Furthermore, the economic crisis caused by the Covid-19 pandemic has significantly reduced growth. In 2021, the economy rebounded, as GDP grew an estimated 5.3% mainly supported by household consumption (underpinned by growing employment and increasing wages) and public investment in reconstruction efforts following the earthquake of 2019. Economic activity is expected to normalise gradually in 2022 and 2023, with the IMF forecasting growth of 4.5% and 4.1%, respectively. However, the COVID-19 pandemic and high energy prices represent downside risks to the forecast.

According to IMF data, public debt represented 81.5% of GDP in 2021, much higher than the pre-pandemic level of 67.8%. According to the IMF's latest forecast, it is expected to remain stable at 79.5% this year and 79.2% in 2023. Despite the strong recovery of revenue, in 2021 high public expenditure for investment pushed the fiscal deficit at 5.9% (EU Commission). A planned public wage increase coupled with a Eurobond issuance are projected to slow the reduction of fiscal deficit to 4% in 2022 and 3.5% in 2023. The Central Bank did not increase its low policy rate of 0.5%; nevertheless, increased energy prices contributed to an increase in inflation (1.9% in 2021). More persistent upward pressure from wage growth is forecast to drive the inflation rate towards the central bank’s 3% inflation target, reaching 2.3% this year and 2.5% in 2023.

After reaching a record low of 11.7% in 2020 due to the negative economic impact of the COVID-19 pandemic, the situation worsened in 2021, when the rate stood at 12% (IMF). The European Commission forecasts that moderate employment growth is expected to gradually reduce the unemployment rate to just above 10% by 2023, whereas the IMF forecasts an increase to 12.5%. Albania remains one of the poorest countries in Europe (with a GDP per capita PPP of USD 15,225 - IMF): the latest figures from the national statistical office show that 23% of the population was at risk of poverty before the pandemic. A large share of GDP (estimated at around 50%) is still accounted for by the informal economy, which hinders the economic reform agenda. In the midst of the crisis, the European Commission decided to open accession negotiations with Albania.

 
Main Indicators 20202021 (e)2022 (e)2023 (e)2024 (e)
GDP (billions USD) 15.16e18.3118.2618.8419.86
GDP (Constant Prices, Annual % Change) -3.5e8.54.02.53.2
GDP per Capita (USD) 5e6666
General Government Gross Debt (in % of GDP) 75.973.970.370.268.5
Inflation Rate (%) 1.62.06.24.33.0
Unemployment Rate (% of the Labour Force) 11.710.610.310.010.0
Current Account (billions USD) -1.32-1.40-1.58-1.52-1.56
Current Account (in % of GDP) -8.7-7.7-8.6-8.0-7.9

Source: IMF – World Economic Outlook Database , Latest available data

Note: (e) Estimated Data

Main Sectors of Industry

Agriculture is an important economic sector for the Albanian economy. It contributes 19.1% of the GDP and employs 36.4% 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 a relatively low productivity. Only 24% of its territory is classified as agricultural land while 76% is non-arable land (of which 6% 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.

The industrial sector accounts for 20.1% of the country's GDP and employs 20.1% of the active population. The sector is concentrated on food processing, textiles and clothing, timber work (construction), oil, cement, chemical products, mining, transport and hydraulic energy. The manufacturing sector’s value-added is estimated to contribute to nearly 6.2% of the country’s GDP (World Bank).

The services sector represents 48.4% of the GDP, employing 43.4% of the workforce. Trade, transport and hospitality services, important branches of the Albanian economy, contributed strongly to the country's economic recession, with a 27% decline. Tourism, representing more than 20% of Albania's GDP, was one of the sectors most affected by the pandemic: although Albania received 5.6 million international arrivals in 2021 (114% more compared to 2020 - INSTAT), this figure is still well below the pre-pandemic level. 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) 36.4 20.1 43.4
Value Added (in % of GDP) 19.3 19.7 48.4
Value Added (Annual % Change) 0.9 -1.0 -8.8

Source: World Bank - Latest available data.

 

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Monetary Indicators 20162017201820192020
Albanian Lek (ALL) - Average Annual Exchange Rate For 1 MUR 3.493.453.183.102.76

Source: World Bank - Latest available data.

 
 

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Indicator of Economic Freedom

Definition:

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.

Score:
65,2/100
World Rank:
66
Regional Rank:
35

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.

 

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Foreign Trade in Figures

The country’s trade represents 61% of its GDP and is mostly made with Europe (World Bank, latest data available). The country mainly exports footwear and their parts, suits, bars and rods of iron or non-alloy steel, and cement; while it imports mostly motor cars, petroleum oils, pharmaceutical products and electrical energy.

The European Union remains Albania's main trading partner, as there is a Free Trade Agreement in force with the EFTA states. Italy accounts for almost half of total exports (45.4%), followed by Serbia (12%), Spain (6.1%), Germany (5.9%) and Greece (4.9%). The bulk of imports come from Italy (25.1%), Turkey (9.6%), Greece (9%), and China (8.6% - Comtrade).

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 2020, merchandise exports reached USD 2.5 billion (-7.7% y-o-y), while imports decreased at a slower pace (5.5%), to reach USD 5.5 billion. However, the country is a net exporter of commercial services, which stood at USD 2.4 billion against USD 1.2 billion of imports (-33.9% and -45.5% y-o-y, respectively - data by WTO). In 2020, the external deficit on goods and services stood at 14.7% of the country’s GDP (from 13.6% one year earlier - World Bank, latest data available). Overall, Albanian trade is still hindered by the country’s weak energy, transport infrastructure and limited financial access. According to data from the Institute of Statistics (INSTAT), Albania’s exports surged 35.6% in 2021 (to ALL 369 billion). Meanwhile, imports also surged faster to ALL 801 billion, up 32.3% year-on-year. Thus, Albania’s trade deficit in 2021 stood at ALL 432 billion, up 29.6% compared to 2020.

 
Foreign Trade Indicators 20172018201920202021
Imports of Goods (million USD) 5,2715,9255,8975,5707,718
Exports of Goods (million USD) 2,2922,8702,7162,5063,559
Imports of Services (million USD) 1,8982,1932,3011,2541,996
Exports of Services (million USD) 3,1933,5743,7432,4744,094
Imports of Goods and Services (Annual % Change) 8.42.43.0-19.8n/a
Exports of Goods and Services (Annual % Change) 13.24.16.0-25.6n/a
Imports of Goods and Services (in % of GDP) 46.645.345.338.1n/a
Exports of Goods and Services (in % of GDP) 31.631.631.523.2n/a
Trade Balance (million USD) -3,205-3,381-3,517-3,420n/a
Trade Balance (Including Service) (million USD) -1,979-2,070-2,103-2,204n/a
Foreign Trade (in % of GDP) 78.276.976.961.3n/a

Source: WTO – World Trade Organisation ; World Bank , Latest Available Data

 

Main Partner Countries

Main Customers
(% of Exports)
2020
Italy 45.3%
Serbia 12.1%
Spain 6.0%
Germany 5.4%
Greece 5.0%
See More Countries 26.1%
Main Suppliers
(% of Imports)
2020
Italy 25.2%
Türkiye 9.6%
China 9.0%
Greece 9.0%
Germany 7.8%
See More Countries 39.4%

Source: Comtrade, Latest Available Data

 
 

Main Products

2.4 bn USD of products exported in 2020
Parts of footwear, incl. uppers whether or not...Parts of footwear, incl. uppers whether or not attached to soles other than outer soles; removable in-soles, heel cushions and similar articles; gaiters, leggings and similar articles, and parts thereof (excl. articles of asbestos) 7.9%
Footwear with outer soles of rubber, plastics,...Footwear with outer soles of rubber, plastics, leather or composition leather and uppers of leather (excl. orthopaedic footwear, skating boots with ice or roller skates attached, and toy footwear) 5.5%
Men's or boys' suits, ensembles, jackets, blazers,...Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts (excl. knitted or crocheted, wind-jackets and similar articles, separate waistcoats, tracksuits, ski suits and swimwear) 5.1%
Bars and rods, of iron or non-alloy steel, not...Bars and rods, of iron or non-alloy steel, not further worked than forged, hot-rolled, hot-drawn or hot-extruded, but incl. those twisted after rolling (excl. in irregularly wound coils) 3.5%
Cement, incl. cement clinkers, whether or not...Cement, incl. cement clinkers, whether or not coloured 2.4%
See More Products 75.6%
5.4 bn USD of products imported in 2020
Motor cars and other motor vehicles principally...Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excl. motor vehicles of heading 8702) 4.9%
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 4.5%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses "incl. those in the form of transdermal administration" or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 3.5%
Electrical energyElectrical energy 1.5%
Leather further prepared after tanning or crusting...Leather further prepared after tanning or crusting "incl. parchment-dressed leather", of bovine "incl. buffalo" or equine animals, without hair on, whether or not split (excl. chamois leather, patent leather and patent laminated leather, and metallised leather) 1.3%
See More Products 84.3%

Source: Comtrade, Latest Available Data

 
 

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Main Services

Source: United Nations Statistics Division, Latest Available Data

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Political Outline

Current Political Leaders
President: Ilir META (since 24 July 2017) - Socialist Movement for Integration
Prime Minister: Edi Rama (since September 2013) - Socialist Party
Next Election Dates
Presidential election: 2022
Legislative: 2025
Main Political Parties
A number of political parties operate within the country:

- Socialist Party: centre left, social democraty, pro-europeanism
- Democratic Party: centre right, conservative, it is the main opposition party
- Socialist Movement for Integration: centre left
- Party for Justice, Integration and Unity: right wing, nationalist
- Demochristian Party: centre right
- Republican Party: right, conservative
- Social Democratic Party: centre left, supports the Socialist party government
- Liberal Democratic Union: centre, liberal
- Democratic Alliance Party: centre, liberal

Type of State
Parliamentary, democratic and representative Republic.
Executive Power
The President is the head of state and is elected by a three-fifths majority vote of all Assembly members for a 5 year term (renewable once). Although the position is largely ceremonial, the Constitution does give the President authority to appoint and dismiss some civil servants in the executive and judicial branches. The Prime Minister is the head of the government and holds the executive powers. He is appointed by the President and approved by a simple majority of all members of the Assembly. The Prime Minister proposes the Council of Ministers which must be nominated by the President and approved by the Assembly.
Legislative Power
The legislature in Albania is unicameral. The parliament, called People's Assembly, consists of 140 seats, with members elected directly in multi-seat constituencies by proportional representation vote. All members serve 4-year terms.
 

Indicator of Freedom of the Press

Definition:

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.).

World Rank:
83/180
Evolution:
84/180
 

Indicator of Political Freedom

Definition:

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.

Ranking:
Partly Free
Political Freedom:
3/7
Civil Liberties:
40/60

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Albania, please visit official portal Coronavirus.al (in Albanian), which also provides information about the geographical distribution of the epidemic in the country. Daily reports on the situation can be found on the website of the Prime Minister of Albania.
For the international outlook you can consult the latest
situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures

To find out about the latest public health situation in Albania and the current sanitary measures in vigour, please consult the official portal Coronavirus.al (in Albanian) including the up-to-date information on the containment measures put in place and public health recommendations for citizens, businesses, public administration employees and private sector employees. The list of the legislative acts adopted to introduce the sanitary measures are available here. An overview can be found on the Deloitte website.
The state of natural catastrophe has been extended until June 23rd.

Travel restrictions

The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.

The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.

Import & export restrictions
The export of medicines and medical devices will be allowed only upon the authorization of the Minister of Health (subject to a penalty of ALL 5 million, accompanied with the suspension of the activity for 6 months in case of reiteration).
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Albania on the
International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan

To know about the economic measures taken by the Albanian government to address the impact of the COVID-19 pandemic on the national economy, please visit the dedicated page on the official governmental portal Coronavirus.al (in Albanian). A second economic support package has also been announced. For an English overview of such measures, refer to the website of KPMG and to the Deloitte guide.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the
Albanian government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Albania in the IMF’s Policy Tracker platform.

Support plan for businesses

For the information on the local business support scheme and taxation measures established by the Albanian government to help businesses to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult the dedicated pages on the governmental portal Coronavirus.al (in Albanian). Further information can be sourced on the Deloitte guide.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.

Support plan for exporters

The second set of measures taken by the Albanian government includes a sovereign guarantee of ALL 15 billion (0.9% of GDP) to provide loans for working capital for active processing exporting companies (and for the tourism sector), with the government taking charge of the interest costs.

 

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Latest Update: November 2022