Albanian Economy Forecast Shows Resilience with Upgraded Growth Forecast
The European Commission has delivered a positive outlook for the Albanian economy forecast, upgrading its 2024 growth forecast to 3.8% from the previous 3.3%. This robust performance nearly matches 2023’s impressive 3.9% expansion, with household spending emerging as the primary growth engine.
However, experts note that some headwinds are expected, particularly from weaker export performance and a notable uptick in imports, which could temper the overall economic momentum.
Demographics Cast Shadow Over Economic Prospects
In a concerning development, Albania’s population has experienced a dramatic 14% decline, shrinking from 2.8 million in 2011 to 2.4 million in 2023. As revealed in the latest census, this exodus of working-age citizens poses a significant challenge to the country’s labour market despite positive employment trends.
The EC warns that growing shortages of skilled workers, compounded by continued emigration, could threaten future growth.
The labour market presents a complex picture: while employment figures are improving and unemployment continues to decline, the persistent brain drain remains a critical concern.
Industry experts suggest this demographic shift could reshape Albania’s economic landscape, forcing businesses to adapt through increased automation or higher wages to retain talent.
Financial Health Check: Mixed Signals Ahead
Albania’s fiscal landscape shows remarkable improvement, with the government deficit contracting 1.3% of GDP in 2023. The first nine months of 2024 have been particularly impressive, with revenue collection surging by 10% year over year, aligning perfectly with budgetary projections. However, more public expenditures, especially capital spending, must be utilised.
Several key financial indicators paint a nuanced picture:
- Public Wages: Set for significant increases
- Social Insurance: Expanding coverage and costs
- Interest Costs: Showing upward pressure
- Public Investment: Expected acceleration in coming months
- Primary Balance: Maintaining surplus, adhering to fiscal rules
Inflation and Currency Dynamics
The inflation trajectory has been notably favourable, with rates dropping to 1.9% in September. This decline. Attribution “Someone gives.”. There are two main factors:
- Lower inflation rates among Albania’s trading partners
- Strengthening of the domestic currency (lek)
However, the European Commission highlights potential risks, including:
- Exchange rate volatility concerns
- Labor market constraints
- Possible resurgence of inflationary pressures
The Albanian economy is expected to moderate slightly, with growth easing to 3.6% in 2025 and 3.5% in 2026. The gradual return of inflation to the central bank’s 3% target suggests a controlled economic environment. While government debt has successfully dropped below the 60% of GDP threshold, supported by prudent fiscal management and favourable economic conditions, continued vigilance will be crucial to maintain this positive trajectory in the face of regional and global economic uncertainties.
The success of Albania’s economic policies will largely depend on how effectively the country can address its demographic challenges while maintaining fiscal discipline and fostering an environment conducive to sustainable growth. The European Commission’s forecast serves as both a validation of recent progress and a reminder of the work ahead.
