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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) 15.28e14.8316.7718.0118.93
GDP (Constant Prices, Annual % Change) 2.2-3.3e5.34.54.1
GDP per Capita (USD) 5,305e5,1535,8376,2846,623
General Government Gross Debt (in % of GDP) 67.8e77.6e81.579.579.2
Inflation Rate (%) 1.41.6e1.92.32.5
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) -7.6-8.9-8.6-8.3-8.2

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Country Risk

See the country risk analysis provided by La Coface.

 

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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.

 
Monetary Indicators 20162017201820192020
Albanian Lek (ALL) - Average Annual Exchange Rate For 1 USD 124.14119.10107.99109.90108.65

Source: World Bank - Latest available data.

 

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Foreign Trade

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 Values 20162017201820192020
Imports of Goods (million USD) 4,6695,2715,9255,8975,570
Exports of Goods (million USD) 1,9622,2922,8702,7162,506
Imports of Services (million USD) 1,7711,8982,1932,3011,254
Exports of Services (million USD) 2,6513,1933,5743,7432,474

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20162017201820192020
Foreign Trade (in % of GDP) 74.878.276.976.961.3
Trade Balance (million USD) -2,881-3,205-3,381-3,517-3,420
Trade Balance (Including Service) (million USD) -2,002-1,979-2,070-2,103-2,204
Imports of Goods and Services (Annual % Change) 6.98.42.43.0-19.8
Exports of Goods and Services (Annual % Change) 11.313.24.16.0-25.6
Imports of Goods and Services (in % of GDP) 45.846.645.345.338.1
Exports of Goods and Services (in % of GDP) 29.031.631.631.523.2

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20212022 (e)2023 (e)2024 (e)2025 (e)
Volume of exports of goods and services (Annual % change) 15.815.113.26.65.2
Volume of imports of goods and services (Annual % change) 11.49.410.46.04.6

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Member of the IMF, the World Bank and the Council of Europe.
 

Main Partner Countries

Main Customers
(% of Exports)
2020
Italy 45.4%
Serbia 12.0%
Spain 6.1%
Germany 5.9%
Greece 4.9%
See More Countries 25.8%
Main Suppliers
(% of Imports)
2020
Italy 25.1%
Turkey 9.6%
Greece 9.0%
China 8.9%
Germany 7.7%
See More Countries 39.7%

Source: Comtrade, 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

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.
 

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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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