| Albania’s economic growth in 2024 is expected to stay strong at 3.3%, driven by private consumption, tourism, and construction. Growth is expected to moderately accelerate to 3.4% in 2025. Poverty is expected to continue to decline as employment and wages rise. The country’s medium-term prospects hinge on global recovery and structural reforms. |
| Following a 3.4% real growth rate in 2023, Albania’s economy grew at a higher pace of 3.6% in Q1 2024. On the supply side, growth was primarily driven by services and construction. Private consumption and investment were the main drivers on the demand side. Employment was 66.7% at end-2023, with poverty declining to 21.7%. Based on administrative data for Q1 2024, employment grew by 1.1% year-on-year, driven by the private sector. The average private sector wage increased by 12.7%, reflecting growth across all economic activities. Overall credit increased by 13% year-on-year through July 2024. |
| The current account deficit widened in the first half of the year (H1) due to rapid import growth and decreased goods exports. Net Foreign Direct Investment (FDI) continued to perform strongly, increasing by 8.5%, and foreign currency reserves hit 5.7 billion Euros in July 2024. |
| The annual inflation rate continued its declining trend, averaging around 2.7% in Q1 of 2024, because of downward pressures from lower import prices, domestic currency appreciation and monetary policy normalization. In the subsequent months up to July 2024, inflation has remained stable at around 2.1%. |
| As of July 2024, the government reported a fiscal surplus, on account of robust revenue collection and sluggish execution of capital investment. |
| ECONOMIC OUTLOOK |
| Growth is expected to remain robust at 3.3% in 2024, with increased tourism and construction expected to drive exports, and consumption and investment growth at rates similar to the pre-pandemic period. The inflation rate is projected to remain below the 3% target in the medium term, despite the increase in wages, which has partially been offset by the appreciation of the Albanian lek. |
| The current account deficit is expected to hover at 3.8% of GDP in the medium term. With higher growth expected, poverty is also projected to decrease. A tighter labour market could further boost wages. |
| Albania’s primary balance is projected to improve and reach 0% of GDP from 2024 onwards. The government plans to continue improving tax administration, as envisioned in the Medium-Term Revenue Strategy. Public debt is expected to decline further in the medium term. |
| Given Albania’s growing reliance on external financing, risks related to the exchange rate, interest rate, and refinancing remain elevated. As a small, open economy, Albania is highly exposed to external shocks, such as a recession in the EU or further tightening of financing conditions in international capital markets. Risks to growth emanate from natural disasters and unfavourable global conditions, including geopolitical developments. |
| For the full document click the link below: |
| Albania: Announcement on How Albania Transformed from Europe's Poorest to a Rising Economy |
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