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Country risk of Albania : Economy

Economic Overview

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 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 15.28e14.83e16.7718.0118.93
GDP (Constant Prices, Annual % Change) 2.2e-3.3e5.34.54.1
GDP per Capita (USD) 5,305e5,153e5,8376,2846,623
General Government Gross Debt (in % of GDP) 67.8e77.6e81.579.579.2
Inflation Rate (%) 1.41.6e2.05.53.7
Unemployment Rate (% of the Labour Force) 11.511.7e12.012.512.5
Current Account (billions USD) -1.17-1.32e-1.45-1.50-1.55
Current Account (in % of GDP) -7.6-8.9e-8.6-8.3-8.2

Source: IMF – World Economic Outlook Database - April 2021.

Note 1: (e) Estimated Data

Country Risk
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Monetary Indicators 20162017201820192020
Albanian Lek (ALL) - Average Annual Exchange Rate For 1 EUR 132.06134.54127.41123.48124.10

Source: World Bank - Latest available data.

 
 

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

 

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Latest Update: July 2022