Economic Outline

Economic Indicators

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.

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