“Foreign demand boosted the Albanian economy” - WB report: Faster implementation of reforms will increase per capita income
"Despite a slowdown in tourism growth, the services and construction sectors were the main drivers of economic growth on the supply side, offsetting declines in the agriculture sector and other industrial sectors," the World Bank said, referring to Albania's economy.
The Regular Economic Report for the Western Balkans highlights the fact that Albania's economy recorded a moderate growth of 3.4% in annual terms in the first quarter of 2025, reflecting strengthening foreign demand and a slight slowdown in domestic demand.
Inflation remained below 3 percent, poverty fell as a result of strengthening labor markets, and public debt continued its downward trend. According to the World Bank, although external risks remain present, progress in the EU accession process is likely to support investor confidence, policy continuity, and long-term growth.
Regarding the labor market, the international financial institution notes that conditions improved, unemployment decreased and employment increased. Increased employment in the service sector compensated for job losses in agriculture in the first quarter of 2025, reducing the unemployment rate to 8.7% and increasing the employment rate (age 15-64) to 69.5% for both men and women. Despite inflationary pressures from rising wages, average inflation during the first seven months of 2025 remained low at 2.2%, supported by the strengthening of the lek and the slowdown in inflation in the Eurozone.
In the first half of 2025, fiscal policy supported demand through moderate easing, with the overall fiscal surplus narrowing to 2.7 percent of GDP from 4.3 percent a year earlier.
In its projections for Albania, the World Bank notes that Albania’s economic growth is expected to slow to 3.7% in 2025 and 3.5% in the medium term, due to uncertainties in global trade and changes in the international outlook. “However, faster implementation of EU-supported reforms could accelerate the pace of per capita income growth to 3.1% above the baseline as well as convergence with EU living standards,” the World Bank concludes.
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