High wages endanger Albania as a tourist destination - IMF: Forced growth harms the sector's competitiveness
The tourism sector is considered the engine of the economy, contributing to its rapid growth. The International Monetary Fund highlights that after a tourism boom in 2023, tourism has continued to be an important pillar of domestic growth, with positive performance beyond the traditional peak season.
In the first half of 2024, tourism receipts increased by 25.4 percent compared to the same period in 2023, while if the first 10 months of 2024 and 2023 are compared, accommodation arrivals increased by 43 percent.
The IMF notes that demand for new accommodations and tourism-related skills have driven increased investment and job demand in several sectors.
At the same time, the efforts being made by the government to exploit the country's tourism potential by modernizing and expanding the national airport system, as well as the new international airport in Vlora, which is expected to begin operating in 2025, are considered positive in this regard.
But the good performance of the tourism sector as well as competition with other international destinations may be jeopardized by the labor force.
The International Monetary Fund emphasizes that "while Albania remains competitive as a tourist destination, pressures for broader competitiveness will increase if wage growth continues to outpace productivity growth, even as labor shortages from an aging population and migration continue to exert upward pressures on labor costs."
In the past two years, tourism operators have been forced to raise employee salaries to levels much higher than the national average due to the shortage of labor. But this rising cost is expected to be reflected in the increase in prices for accommodation, food and other services, which could lead to a decline in interest from tourists, who have seen Albania as a largely cheap destination until now compared to its competitors.
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