Albania: Country Context
The economy in Albania has been growing almost steadily over the past three decades. Performance is now well above its pre-pandemic trend, mostly thanks to a rapidly growing tourism sector. Prudent fiscal policies contributed to a reduction in public debt, while proactive monetary policy, falling global commodity prices, and appreciation of the local currency have facilitated disinflation. The IMF expects growth prospects to remain robust, driven by construction, tourism and domestic consumption.
However, despite the overall positive picture, considerable structural challenges remain. The rapid development of touristic infrastructure puts pressure on the environment, e.g. through numerous hotel complexes along the coast and a new airport being built within a protected area. Moderate economic productivity and competitiveness require fundamental reforms. The share of informal economy remains high, partially fuelled by illicit flows of funds, which also drive the construction boom in the capital and in touristic areas. Limited trust in the rule of law and the perception of systemic corruption limit foreign direct investment.
The continuous high emigration of the working-age population, followed by lower birth rates lead to a continuous loss of human capital. Migration is primarily driven by dissatisfaction with public services and the perception of limited economic perspectives due to widespread corruption. The rapidly ageing population creates new socio-economic challenges, like the care for elderly and financing the pension system, and leads to a lack of workforce, which is partially met by migrant workers from Asian countries.
Overall, Albania is progressing towards its clear but ambitious goal to become an EU member by the end of this decade. Structural reforms, to align with EU requirements, are taking place at a fast pace, but need to deepen to provide the population and the large diaspora with an attractive perspective to live and invest in the country.