In Albania we focus on supporting governance improvements across the economy, enhancing private sector competitiveness and inclusion through wider access to finance and skills as well as strengthening energy diversification and low-carbon transition.
In Albania we focus on:
Support governance improvements across the economy. The EBRD will support the commercialisation and restructuring of key state-owned enterprises, strengthen the corporate governance of firms, improve the quality of institutions and strengthen the rule of law.
Enhance private sector competitiveness and inclusion through wider access to finance and skills. The EBRD will foster increased competition through entry/consolidation and a levelling of the playing field. Increased access to finance and promoting entrepreneurship will strengthen economic growth. Improved business skills, standards and business sophistication will improve the competitiveness of domestic firms on local and regional markets. Access to skills development (incl. skills mismatch reduction) will create employment opportunities. The EBRD will also support increased access to infrastructure especially with the goal to unlock economic opportunities for inclusion target groups.
Strengthen energy diversification and low-carbon transition. The EBRD will support the creation of a more diversified energy mix with reduced vulnerability to climate change and reinforced networks for domestic and regional connectivity.
As well as being a country where the EBRD works, Albania is also an EBRD donor. Albania agreed to contribute up to E36M in grant funding for first-loss risk cover as part of the EBRD €100 million Albanian Agribusiness Support Facility. The Facility was approved in 2015 to promote and enhance access to finance for agribusinesses in Albania.
The EBRD’s latest Albania strategy was adopted on 12 February 2020
Albania's policy response to the coronavirus crisis
The Covid-19 pandemic is affecting the Albanian economy primarily through its negative effect on tourism, which normally contributes to more than a fifth of the country’s GDP. According to the Albanian Tourism Union, around 5 million overnight stays during the summer season have been cancelled this year.
Also, goods exports to Italy, Albania’s main trading partner, fell by more than 40 per cent year-on-year during the most severe lockdown (March to May 2020), and by 15 per cent year-on-year in June-July. Overall, total exports of goods in the first seven month of 2020 were 17 per cent lower in year-on-year terms.
The decline in remittances, which decreased by almost one fifth in the first half of 2020 versus the same period of 2019, has dampened private consumption.
By end-August 2020, the government had adopted two economic support packages, worth 2.8 per cent of GDP. The packages consisted mainly of increased government expenditures to support businesses, sovereign guarantees and one-off social transfers. Monetary policy responded by policy rate cuts, to the record low of 0.5 per cent, while foreign exchange market interventions at the end of March 2020 sought to mitigate depreciation pressures. By mid-2020 public debt stood at 80 per cent of GDP, 14 percentage points higher than at the end of 2019.
Taking everything into account, Albania's GDP is projected to contract by 9.0 per cent in 2020, rebounding by 4.5 per cent in 2021, supported by reconstruction after the earlier earthquake. These forecasts assume no major resurgence of the pandemic.
EBRD forecast for Albania’s Real GDP Growth in 2022 3.0%
EBRD forecast for Albania's Real GDP Growth in 2023 3.0%
The economic expansion seen in 2021 continued into the first quarter of 2022 as output grew by 6 per cent year-on-year, driven by strong export and private investment growth, alongside persistently robust household consumption. High credit growth to the private sector, at 9 per cent year-onyear in July, and stable remittances continue to support investments and household consumption. The tourism season is on track for a record year, with foreign tourist arrivals and nights spent well above pre-pandemic levels in the first half of 2022. Inflation reached 8 per cent annual in August 2022, the highest in the last 20 years but below regional peers. The central bank tightened monetary policy three times in 2022, from 0.5 per cent in March to 1.75 per cent in August, to help contain inflation. Economic growth is projected at 3 per cent in 2022 and 2023. Key risks to the near-term outlook include rising inflation and tightened financing conditions, which are set to dampen household consumption and investment. On the positive side, the strong tourism season will boost external and fiscal accounts ahead of the challenging heating season and lead growth in the third quarter of the 2022.