Albania overview

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View list of EBRD projects in Albania

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.

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EBRD forecast for Albania’s Real GDP Growth in 2022 3.0%

EBRD forecast for Albania's Real GDP Growth in 2023 3.3%

The economy is expected to achieve slower growth in 2022 following a strong recovery in 2021, when GDP increased by an estimated 8.5 per cent on the back of growing tourism and a recovery in domestic demand. Robust growth in investments was supported by earthquake-related public reconstruction. The macroeconomic environment remains largely stable; inflation increased to 5.7 per cent year-on-year in March 2022 reflecting globally rising commodity prices, but while this breaches the central bank’s target of 3 per cent, it remains lower than in most regional economies. The Bank of Albania raised the key monetary policy rate from 0.5 per cent to 1 per cent at end-March 2022. The banking sector remains well capitalised and liquid, with strong credit growth in the first two months of the year and non-performing loans at their lowest levels since 2014. Meanwhile, Albania’s fiscal accounts are feeling the impact of the energy crisis due to heavy imports of electricity under significantly higher prices. The government is also under pressure to support households in light of rising prices and fears of food shortages. While direct economic and financial links with Ukraine and Russia are negligible, high uncertainty around the war and its economic repercussions, an expected slowdown in European markets and rising food and energy prices all pose serious risks to the outlook and are expected to drag down short term growth. GDP is expected to grow at 3.0 per cent in 2022 and 3.3 per cent in 2023.

albania in the ebrd's 2021-22 transition report

 

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