Economy and Businesses

Albania’s Economic Outlook: Growth, Challenges, and EU Aspirations

Overview of Albania’s Economic Freedom

As of the 2018 Index of Economic Freedom, Albania’s economic freedom score stands at 64.5, ranking it the 65th freest economy globally. Within the European region, Albania places 32nd out of 44 countries, with an economic score below the regional average, yet above the global average. Despite a modest overall score increase, improvements in fiscal health were offset by declines in judicial effectiveness, tax burden efficiency, and business freedom.

Economic Transformation and Growth

Over the past decade, Albania has undergone significant economic restructuring. The transition to a more open-market economy has led to notable progress in income growth and poverty reduction. A liberal trade regime, coupled with a relatively efficient regulatory framework, has fostered the rise of a vibrant entrepreneurial ecosystem. However, rule of law reforms remain crucial to sustaining long-term economic freedom and development.

Historical Context and Political Stability

Albania began its shift from communism to a multiparty democracy in 1991, with political stability gradually improving after the collapse of pyramid schemes in 1997. The current Prime Minister, Edi Rama, assumed office in 2013, and his Socialist Party secured a parliamentary majority in 2017. A key policy focus of the government is European Union accession, for which Albania obtained EU candidate status in 2014.

Economic Structure and Key Sectors

The Albanian economy remains heavily agriculture-based, with the sector employing approximately 50% of the workforce. However, tourism and services have become increasingly significant contributors to GDP. Despite recent growth, Albania continues to be one of Europe’s poorest nations, facing persistent issues such as a large informal economy, inadequate infrastructure, high unemployment, and ongoing emigration due to limited domestic opportunities.

Key Takeaways:

• Albania ranks 65th in global economic freedom, with room for improvement in judicial and business indicators.

• Economic restructuring has improved income and reduced poverty, but challenges remain in governance and infrastructure.

• EU membership remains a strategic goal, influencing Albania’s economic reforms and policy direction.