TIRANA, October 17, 2024 - Albania's economic growth in 2024 is expected to stay strong at 3.3%, driven by private consumption, tourism, and construction, according to the latest Western Balkans Regular Economic Report - released today by the World Bank. Growth is expected to moderately accelerate to 3.4% in 2025.
Poverty levels have decreased with additional reductions anticipated due to rising labor income. Employment has increased, particularly in the private sector, where wages have grown by an average of 12.7% across all industries during the last year). Inflation is gradually easing, and as of July 2024, budget revenues have seen an 8% year-on-year increase.
Looking ahead, Albania's economic outlook will depend on the recovery of the global economy and the pace of ongoing structural reforms. The country's aspirations to join the European Union (EU) serve as a guiding force for its continued progress. Achieving higher growth will require swift action on government reforms aimed at boosting productivity, improving the business climate, and deepening Albania's integration into international markets.
According to the report, economic growth in the Western Balkans is projected to moderately accelerate through 2025, mainly driven by increased consumption and investment, helped by increased purchasing power, according to the Western Balkans Regular Economic Report released today by the World Bank.
The World Bank forecasts that the collective economic growth of Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia will reach 3.7% in 2025, a revision of 0.2 percentage points upward from the spring edition of the report. Growth for 2024 is expected to reach 3.3%, an increase of 0.1 percentage point from initial estimates.
"Domestic factors continue to support a moderate acceleration of growth in the Western Balkans. In addition, in the medium term, the gradual recovery of economic activity in the European Union is expected to play a crucial role by bolstering exports from the region," said Isolina Rossi, an economist at the World Bank and the report's lead author. "Despite the positive outlook, the region remains vulnerable to several risks, including sluggish global growth, a rebound in inflation, political uncertainty, and extreme weather events."
Table 1. Western Balkans Outlook, 2021-26
(Real GDP growth at market prices in percent)
As economic growth in the Western Balkans strengthens, the living standards continue to gradually converge with those of more advanced European Union economies. However, retaining the growth momentum and accelerating the pace of convergence requires structural reforms, including those outlined in the European Union's Growth Plan.
"Economic integration is a key driver of growth for small economies such as those in the Western Balkans," said Xiaoqing Yu, World Bank Country Director for the region. "To foster this growth, countries should enhance regional and European Union trade, reduce border wait times, and integrate payment systems. Furthermore, addressing demographic and labor market challenges requires a strong focus on developing human capital. To advance from middle- to high-income status, improving education and health systems is essential."
As nearly one in four individuals from the Western Balkans currently reside abroad, better managing the Western Balkans' global workforce could be a key driver of economic development in the region. While emigration may pose challenges, such as labor shortages, there are also clear opportunities to leverage migration for economic benefits.
According to the report, when managed effectively, migration can alleviate poverty, stimulate exports, and attract investment, eventually resulting in job creation and knowledge transfers. For example, remittances can improve financial resources for migrant households. In addition, the return of skilled migrants can create a 'brain gain' for their home countries, while the allure of higher wages abroad can motivate education and skill enhancement among those who remain.
To maximize the benefits of migration, the report recommends several policy actions for the Western Balkans:
- Developing skills training and mobility programs in partnerships with destination countries and expanding bilateral social security agreements.
- Enhancing migrant protections throughout their migration journey to mitigate risks they may face and incentivize return.
- Facilitating the transfer of capital, expertise, and cutting-edge technologies from members of the diaspora.
- Utilizing digital tools and improving data collection for effective migration management and policymaking.
