The economic context of Albania

Economic Indicators

Albania is considered a transition economy, not highly integrated into global capital flows but demonstrating strong economic performance. The country’s economy has performed strongly in recent years, driven by prudent macroeconomic policies and a thriving tourism sector, with output now well above pre-pandemic levels. After growing by 3.9% in 2023, Albania's real GDP is expected to average around 3.5% annually in 2024-2029, driven by domestic consumption, tourism, and construction (IMF). In 2024, the country recorded one of the highest growth rates in Europe, at an estimated 3.6%, as domestic demand was supported by wage growth and construction activity. For 2025–2026, GDP growth is forecast at around 3.5%, slightly moderating but staying strong. Slower employment growth may dampen private consumption, while public consumption is expected to decelerate.

Albania’s fiscal position improved in 2023, with the general government deficit falling to 1.3% of GDP. In the first nine months of 2024, revenues rose by about 10% y-o-y, aligning with the budget plan, while public expenditure, especially capital spending, was underexecuted. As a result, the budget was in surplus through September. However, for 2024 as a whole, the deficit was estimated at 2.3% of GDP due to higher spending on public wages, social insurance, interest costs, and accelerated public investment. In 2025, the deficit is expected to stay at a similar level before narrowing slightly to 2% of GDP in 2026. The primary balance is set to remain in surplus, consistent with the national fiscal rule. Government debt fell below 60% of GDP in 2023, supported by a positive primary balance, a favourable snowball effect, and an upward revision of nominal GDP. The debt ratio is projected to decline more gradually through 2026, driven by nominal GDP growth (EU Commission). Inflation eased significantly in 2024, averaging 2.2%, down from 4.8% in 2023. This sharp decline was driven by lower imported costs, supported by a strong exchange rate and falling prices in Albania’s trading partners. At the same time, domestic pressures persist due to high demand, rising wages, and increasing production costs. Inflation is expected to rise slightly in the coming years.

The unemployment rate was estimated at around 10.7% in 2024 by the IMF and is expected to remain relatively stable in the short term. Despite labour market improvements, emigration remains a challenge. Preliminary results from the 2023 Population and Housing Census, released in June 2024, show Albania’s population declined by 14%, from 2.8 million in 2011 to 2.4 million in 2023, reducing the working-age population. Moreover, a large share of GDP (estimated at around 50%) is still accounted for by the informal economy, which hinders the economic reform agenda.

Main Sectors of Industry

Agriculture is a pivotal sector for the Albanian economy. It contributes 16.2% of the GDP and employs 34.9% 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 the national 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). However, 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 the Minister of Agriculture and Rural Development show that the country’s agricultural exports increased 21% y-o-y in 2024. The government's objective is to reach USD 1 billion in exports by 2030.

The industrial sector accounts for 23% of the country's GDP and employs 21.2% 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 has historically been significant contributors to the economy, leveraging the country's skilled workforce and competitive labour 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 48% of the GDP, employing around 43.9% 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 11.7 million in 2024 (+15.2% 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 11 banks (five of which have Albanian capital and six with foreign capital), 40 non-bank financial institutions (NBFIs), 645 foreign exchange bureaus, 16 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)	34.9	21.2	43.9
Value Added (in % of GDP)	16.2	23.0	48.0
Value Added (Annual % Change)	-1.8	3.1	8.3

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition

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

 

 

Sources of General Economic Information

Ministries

Ministry of Finance and Economy (in Albanian)

Statistical Office

National Institute of Statistics

Central Bank

Central Bank of Albania

Stock Exchange

Tirana Stock Exchange

Economic Portals

Economic news on Albania
Albanian Centre for Competitiveness and International Trade