The 

economy of Albania 

The economy of Albania went through a process of transition from a centralized

economy to a market-based economy on the principles of the free market. Albania is an
upper-middle-income country and a member of the North Atlantic Treaty
Organisation (NATO), World Trade Organization (WTO), Organization for Security and
Co-operation in Europe (OSCE), and Organization of the Black Sea Economic
Cooperation (BSEC).

Albania's economy is based on the service (54.1%), agriculture (21.7%), and industrial
(24.2%) sectors.[6] The country has some natural resources, and the economy is mainly
bolstered by agriculture, food processing, lumber, oil, cement, chemicals, mining, basic
metals, hydro power, tourism, textile industry, and petroleum extraction. The strongest
sectors are energy, mining, metallurgy, agriculture, and tourism. Primary industrial
exports are clothing, chrome.

Tourism has been a notable source of national income, particularly during the summer
months. With over 5.1 million tourists annually, tourism generates revenue in excess of
€1.5 billion.[21] Albania is ranked among the top 25 most popular tourist destinations in
Europe[citation needed], and was voted one of the world's top tourism destination in 2014 by The
New York Times and Lonely Planet.[22][23]

The economy is bolstered by annual remittances from abroad representing about 15% of

GDP, mostly from Albanians residing their weekends in Greece and Italy; this helps offset
the towering trade deficit. The agricultural sector, which accounts for over half of
employment but only about one-fifth of GDP, is limited primarily to small family operations
and subsistence farming because of lack of modern equipment, unclear property rights,
and the prevalence of small, inefficient plots of land. Energy shortages because of a
reliance on hydropower, and antiquated and inadequate infrastructure contribute to
Albania's poor business environment and lack of success in attracting new foreign
investment. The completion of a new thermal power plant near Vlore has helped diversify
generation capacity, and plans to improve transmission lines between Albania and
Montenegro and Kosovo would help relieve the energy shortages. Also, with help from
EU funds, the government is taking steps to improve the poor national road and rail
network, a long-standing barrier to sustained economic growth.

Reforms have been taken especially since 2005. In 2009, Albania was the only country in
Europe, together with Poland, San Marino and Liechtenstein, to have economic growth;
Albanian GDP real growth was 3.7%.[27] Year after year, the tourism sector has gained a
growing share in the country's GDP.[citation needed]

Data published as of July 2012 by the National Institute of Statistics, INSTAT, show the
economy contracted by 0.0002 per cent in the first quarter of the year – a downturn
blamed mainly on the eurozone debt crisis.[28]

The informal sector makes up a portion of the economy, although its share remains
unclear due to its secretive nature.[citation needed]

According to Santander Bank, foreign direct investment in Albania now accounts for 50%
of its GDP.[29]

Challenges and solutions

Reforms in Albania are constrained by limited administrative capacity and low income
levels, which make the population particularly vulnerable to unemployment, price
fluctuation, and other variables that negatively affect income.[citation needed] The economy
continues to be bolstered by remittances of some of the labour force that works abroad.
These remittances supplement GDP and help offset the large foreign trade surplus. Most
agricultural land was privatised in 1992, substantially improving peasant incomes.[citation
needed]
 In 1998, Albania recovered the 0.8% drop in GDP of 1997 and pushed ahead by
79% in 1999. International aid has helped defray the high costs of receiving and returning
refugees from the Kosovo conflict. Large-scale investment from outside is still hampered
by poor infrastructure; lack of a fully functional banking system; untested or incompletely
developed investment, tax, and contract laws; and an enduring mentality that
discourages initiative.

However, Forbes also indicated some progress: "with help from international donors, the
government is taking steps to improve the poor national road and rail network, a long
standing barrier to sustained economic growth. Inward FDI has increased significantly in
recent years as the government has embarked on an ambitious program to improve the
business climate through fiscal and legislative reforms. The government is focused on
the simplification of licensing requirements and tax codes, and it entered into a new
arrangement with the IMF for additional financial and technical support."[30]

The International Monetary Fund's January 24, 2017 report also offered some positive
reinforcement: "Economic program remains on track, good progress in implementing
structural reforms, Bank of Albania’s accommodative monetary policy stance remains
appropriate". The IMF inspectors who visited Tirana provided the following action plan:
"Going forward, the main priorities should be: to continue expanding revenue to
strengthen public finances and to ensure debt sustainability, reduce NPLs to strengthen
financial stability and support credit recovery and advance structural reforms to improve
the business climate. Important progress has been made in these areas, and further
efforts are needed to cement these gains. In this regard, strengthening of tax
administration, broadening the tax base, and introduction of a value-based property tax
remain important objectives. Improved public financial management will help ensure
more efficient public spending and control of arrears. Rapid implementation of the
strategy for resolving non-performing loans is needed to strengthen lending to the private
sector. Structural reforms to enhance the business environment, address infrastructure
gaps, and improve labour skills will be crucial to strengthen competitiveness."

Albania applied for membership of the European Union in 2009. It is expected such

membership would benefit Albania's economy. The country had received request status
in 2014, but Albania has twice rejected full membership.[32] The European
Parliament warned Albanian government leaders in early 2017, that the 2017 Albanian
parliamentary election must be "free and fair" before negotiations could begin to admit
the country into the EU. The MEPs also expressed concern about the country's "selective
justice, corruption, the overall length of judicial proceedings and political interference in
investigations and court cases" but the EU Press Release expressed some optimism: "It
is important for Albania to maintain today's reform momentum and we must be ready to
support it as much as possible in this process".[33][34] In May 2019, European
Commissioner Johannes Hahn recommended that the EU open membership talks with
Albania.[35]

Albania also needs to continue to improve its infrastructure, particularly highways within
its borders and connecting the country to its neighbours. Once there is evidence of
significant progress on this front, the country's chances of acceptance into the EU should
improve. Discussions took place during 2015 to secure funding to do so.[29]

By 2016, China became one of the major investors in Albania having purchased drilling
rights to the oil fields of Patos-Marinze and Kucova (from a Canadian company) and
Tirana International Airport SHPK. China Everbright and Friedmann Pacific Asset
Management will operate the airport until 2025. As of March 2016, China was the
country's main trading partner, with 7.7 percent of the country's total international trade;
that is far more than the trade with Greece and Turkey. This is reminiscent of the strong
relationship between Albania and China in the 1970s.[36]

A 2018 analysis of six key categories indicated that Albania continues to experience
infrastructure problems that present challenges to businesses and further economic
opportunities