The International Monetary Fund, in a special analysis, claims that Albanian exports are facing challenges which require more efforts in order to create a suitable investment environment.
The IMF recommends that to ease the costs of Albanian products, authorities should complete key infrastructure, transport and energy projects. Also the growth of domestic savings, improvement of governance, the rule of law and the increase of labor market efficiency are measures that influence the improvement of the environment on exports. Exports in Albania increased in 2016, but compared to other Western Balkan countries, they remain low. Exports were dominated by oil until 2013, the weight of which declined in subsequent years. The export market share has grown, especially in textiles and footwear, but at a slower pace than other countries in the region, such as Bosnia and Herzegovina and Macedonia.The ratio of Albania's exports to GDP is low compared to other Western Balkan economies. According to the IMF, performance shows deficiencies in export competition compared with its neighbors.
Survey-based indicators suggest that Albania's competitiveness has improved, but the competition gap with countries in the region continues. Albania's growth in ease of doing business has improved, but other Balkan countries like Bosnia and Herzegovina, Macedonia and Montenegro are converging faster.
Albania's ranking in the Global Competitiveness Report of the World Economic Forum has also remained in stagnation, expanding the already considerable gap between Albania and the regional average. Concentration of exports to low value sectors may be a barrier to future growth.
The IMF analyzes that, unlike high-value exports of neighboring countries such as Serbia and Macedonia, Albania's exports are focused mainly to the textile and footwear sectors as well as oil and minerals. Consequently, growth prospects are limited from the medium-term viewpoint of oil prices, especially given Albania's high cost of using oil.
As regional exports are growing, more than half of Albania's exports go to Italy. Some of these products, especially textiles, are processed in Albania by the orderers and then re-exported to other markets, a large part destined for final consumption in Italy, making Albania dependent on a country with low growth potential. On the other hand, Foreign direct investment (FDI) inflows have increased mainly in the energy sector (gas pipelines, hydropower plants) and mining sectors, but remain limited to other tradable sectors, which indicates that the growth of FDI can not generate significant export growth
Can Albania integrate into European supply chains? The literature shows that the strongest export performance at global and European level has been the result of successful supply chain integration. This integration is facilitated by the proximity to the delivery of supplies, the openness to trade, the similarity of export structures, the business environment and the quality of infrastructure. Albania is well in the first two measures, but it is relatively unfavorable in relation to the last three, the Fund analyzes.