The International Monetary Fund (IMF) has released its latest report on Albania, highlighting the country's commendable economic growth while underscoring significant structural challenges stemming from rapid aging and high emigration rates.]
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Economic Growth and Positive Trends
Albania's economy has displayed robust performance in recent years, driven by prudent macroeconomic policies and a flourishing tourism sector. According to the IMF, the country’s GDP per capita remains about a quarter of the levels seen in the U.S. and EU-15 nations. However, Albania has exceeded its pre-pandemic growth trajectory, benefiting from declining global commodity prices, proactive monetary policies, and a strengthened domestic currency, the lek.
The IMF forecasts a stable economic outlook for Albania, with real GDP growth expected to average around 3.5% annually between 2024 and 2029. This growth is projected to be fueled by strong domestic consumption, an expanding tourism industry, and ongoing construction activities. Inflation, which is anticipated to drop to 2% by the end of 2024, is expected to stabilize near the central bank’s 3% target by 2026.
Structural Challenges
Despite its positive macroeconomic trajectory, Albania faces pressing structural challenges. Rapid population aging and sustained emigration are among the key issues identified by the IMF. These dynamics risk undermining long-term growth potential by depleting the labor force and straining public resources.
To address these challenges, the IMF emphasizes the need for deep structural reforms aimed at improving governance, enhancing public financial management, and boosting productivity. Strengthening human capital through education, training, and workforce participation is seen as vital for aligning Albania’s economic standards with those of the European Union.
Fiscal Discipline and Public Debt
Albania's fiscal policies have contributed significantly to reducing public debt, which is expected to drop from 56% of GDP in 2024 to approximately 50% by 2029. The country’s cautious fiscal management has resulted in a primary surplus target of 0.5% of GDP for 2024, exceeding initial projections.
The IMF acknowledges the progress made in revenue administration and fiscal policy reforms but stresses the importance of continued efforts to address growing spending needs. Investments in public infrastructure, enhanced fiscal transparency, and better management of state-owned enterprises and public-private partnerships are identified as critical areas for improvement.
Financial Sector Stability
Albania’s banking sector remains well-capitalized and liquid, with systemic vulnerabilities largely under control. However, risks persist due to banks' significant exposure to large borrowers, the state, and the real estate sector. Rapid credit growth in real estate and rising property prices present potential challenges for financial stability.
The IMF calls for stricter regulatory compliance, stronger macroprudential tools, and closer alignment with EU financial standards to fortify Albania’s financial system. Deepening financial markets and improving oversight of non-bank financial institutions are also highlighted as priorities for ensuring long-term resilience.
Reforms for EU Integration
The IMF underscores that comprehensive reforms are essential for Albania to fully capitalize on the benefits of its EU accession process. Key priorities include enhancing productivity, integrating into global value chains, removing barriers to business growth, and improving access to finance.
The report also emphasizes the importance of diversifying energy sources, promoting renewable energy, and advancing digital transformation. Investments in education, vocational training, and initiatives to increase women’s participation in the workforce are seen as vital for long-term growth.
Anti-corruption measures, including the implementation of the 2024–2030 Anti-Corruption Strategy, remain critical for improving governance. Continued investments in infrastructure and adherence to international standards in anti-money laundering (AML) and countering the financing of terrorism (CFT) are also high on the agenda.
Conclusion
Albania’s economic progress offers an optimistic outlook, but the country must confront its structural challenges to ensure sustainable and inclusive growth. By advancing reforms in governance, education, and fiscal transparency, Albania can strengthen its resilience and accelerate its convergence with European standards. As the IMF notes, the country’s ability to navigate these challenges will determine its success in fostering long-term economic stability and prosperity.