Economy of Albania

Economy of Albania

Tirana is the economic hub of Albania.
Currency	Lek (ALL)
Fiscal year	Calendar year
Trade organisations	WTO, BSEC
Statistics
GDP	$34.247 billion (PPP, 2016), $15.641 billion (Nominal, 2016)[1]
GDP rank	96th (PPP, 2013 est.)[2]
GDP growth	2.6% (Real, 2015 est.)
GDP per capita	$12.500 (PPP, 2016 est.)[3] $5,695 (Nominal, 2016)
GDP by sector	agriculture: 18.4%, industry: 16.3%, services: 65.3% (2014 est.)
Inflation (CPI)	2.0% (CPI, 2012 est.)
Population below poverty line	14.3% (2012)[4]
Gini coefficient	34.5 (2008)[4]
Labour force	1.280 million (2014)
Labour force by occupation	Agriculture: 18.4%, Industry: 16.3%, Services: 65.3% (December 2014 est.)[4]
Unemployment	17.3% (2015 est.)[4]
Average gross salary	385 € / 430 $, monthly (2015)[5]
Main industries	perfumes and cosmetic products, food and tobacco products; textiles and clothing; lumber, oil, cement, chemicals, mining, basic metals, hydropower
Ease-of-doing-business rank	58th (2017)[6]
External
Exports	$2.008 billion (2015)
Export goods	textiles and footwear; asphalt, metals and metallic ores, crude oil; vegetables, fruits, tobacco
Main export partners	Italy 42.8%  Kosovo 9.7%  United States 7.6%  China 6.1%  Greece 5.3%  Spain 4.8% (2015)[7]
Imports	$4.4.664 billion (2016)
Import goods	machinery and equipment, foodstuffs, textiles, chemicals
Main import partners	Italy 33.4%  China 10%  Greece 9%  Turkey 6.7%  Germany 5.2% (2015)[8]
Public finances
Public debt	$8.782 billion (December 2014)[4]
Revenues	$3.3 billion (Budget 2014)[9]
Expenses	$4.50 billion (Budget 2014)[9]
Economic aid	recipient: ODA: $366 million (top donors were Italy, EU, Germany) (2003 est.)
Credit rating	Standard & Poor's:[10] B (Domestic) B+ (Foreign) BB+ (T&C Assessment) Outlook: Positive [11]
Foreign reserves	$3,139 billion (December 2015)[4]
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars.

The economy of Albania has undergone a transition from its Communist past into an open-market economy since the early 1990s. The country is rich in 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. As of 2014, exports seem to gain momentum and have increased 300% from 2008, although their contribution to the gross domestic product is still moderate.

History

The collapse of communism in Albania came later and was more chaotic than in other Eastern European countries and was marked by a mass exodus of refugees to Italy and Greece in 1991 and 1992. The country attempted to transition to autarky, but this eventually failed badly. Attempts at reform began in earnest in early 1992 after real GDP fell by more than 50% from its peak in 1989. Albania currently suffers from high organised crime and corruption rates.

The democratically elected government that assumed office in April 1992 launched an ambitious economic reform program to halt economic deterioration and put the country on the path toward a market economy. Key elements included price and exchange system liberalization, fiscal consolidation, monetary restraint, and a firm income policy. These were complemented by a comprehensive package of structural reforms including privatization, enterprise, and financial sector reform, and creation of the legal framework for a market economy and private sector activity. Most agriculture, state housing, and small industry were privatized. This trend continued with the privatization of transport, services, and small and medium-sized enterprises. In 1995, the government began privatizing large state enterprises. After reaching a low point in the early 1990s, the economy slowly expanded again, reaching its 1989 level by the end of the decade.^[12]

Macroeconomics trends

This is a chart of Gross Domestic Product (GDP) of Albania in in US dollars based on Purchasing Power Parity (PPP) from estimates by the International Monetary Fund.^[13]

Year	GDP (PPP)	GDP (PPP) per capita	GDP (nominal)	GDP per capita
2014	31,441	10,866	13,238	4,575
2015	32,660	11,304	11,401	3,946
2016	34,214	11,861	12,144	4,210
2017	36,241	12,583	12,876	4,471

For purchasing power parity comparisons, the US dollar is exchanged at 49 leks (2007 estimate).^[13] Mean wages were $3.83 per man-hour in 2009.

Albania is an upper-middle income country by Western European standards, with GDP per capita greater than the several countries in the region. According to Eurostat, Albania's GDP per capita (expressed in PPS – Purchasing Power Standards) stood at 35 percent of the EU average in 2008. Unemployment rate of 13.3% is considerably lower than many countries in Balkans, For Example, Serbia has an unemployment rate of 24%.^[14]

Results of Albania's efforts were initially encouraging. Led by the agricultural sector, real GDP grew by an estimated 11% in 1993, 8% in 1994, and more than 8% in 1995, with most of this growth in the private sector. Annual inflation dropped from 25% in 1991 to single-digit numbers. The Albanian currency, the lek, stabilized. Albania became less dependent on food aid. The speed and vigour of private entrepreneurial response to Albania's opening and liberalizing was better than expected. Beginning in 1995, however, progress stalled, with negligible GDP growth in 1996 and a 9% contraction in 1997. A weakening of government resolve to maintain stabilization policies in the election year of 1996 contributed to renewal of inflationary pressures, spurred by the budget deficit which exceeded 12%. Inflation approached 20% in 1996 and 50% in 1997. The collapse of financial pyramid schemes in early 1997 – which had attracted deposits from a substantial portion of Albania's population – triggered severe social unrest which led to more than 1,500 deaths, widespread destruction of property, and an 8% drop in GDP. The lek initially lost up to half of its value during the 1997 crisis, before rebounding to its January 1998 level of 143 to the dollar. The new government, installed in July 1997, has taken strong measures to restore public order and to revive economic activity and trade.

Albania is currently undergoing an intensive macroeconomic restructuring regime with the International Monetary Fund and the World Bank. The need for reform is profound, encompassing all sectors of the economy. In 2000, the oldest commercial bank, Banka Kombetare Tregtare/BKT was privatized. In 2004, the largest commercial bank in Albania—then the Savings Bank of Albania—was privatised and sold to Raiffeisen Bank of Austria for US$124 million. . Macroeconomic growth has averaged around 5% over the last five years and inflation is low and stable. The government has taken measures to curb violent crime, and recently adopted a fiscal reform package aimed at reducing the large gray economy and attracting foreign investment.

The economy is bolstered by annual remittances from abroad representing about 15% of GDP, mostly from Albanians residing 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 San Marino and Liechtenstein, to have economic growth; Albanian GDP real growth was 3.7%.^[15] Year after year, the tourism sector has gained a growing share in the country's GDP.

Data published as of July 2012 by the National Institute of Statistics, INSTAT, show the economy contracted by 0.2 per cent in the first quarter of the year - a downturn blamed mainly on the eurozone debt crisis.^[16]

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

External trade

However, reforms 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. The economy continues to be bolstered by remittances of some 20% of the labour force that works abroad, mostly in Greece and Italy. These remittances supplement GDP and help offset the large foreign trade deficit. Most agricultural land was privatized in 1992, substantially improving peasant incomes. In 1998, Albania recovered the 8% drop in GDP of 1997 and pushed ahead by 7% 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.

Agriculture

Agriculture in Albania employs 47.8% of the population and about 24.31% of the land is used for agricultural purposes. Agriculture contributes to 18.9% of the country's GDP.

The main agricultural products in Albania are tobacco, figs, olives, wheat, maize, potatoes, vegetables, fruits, sugar beets, grapes, meat, honey, dairy products, and traditional medicine and aromatic plants.

Wine production

The wine of Albania is characterized by its unique sweetness and indigenous varieties. Albania produced an estimated 17,500 tonnes of wine in 2009.^[17] During communism, the production area expanded to some 20,000 hectares (49,000 acres).^[18]

Albania has one of Europe's longest histories of viticulture.^[18] The today's Albania region was one of the few places where vine was naturally grown during the ice age. The oldest found seeds in the region are 4,000 to 6,000 years old.^[19] Ancient Roman writer Pliny describes Illyrian wine as "very sweet or luscious" and refers to it as "taking the third rank among all the wines".^[20] Albanian families are traditionally known to grow grapes in their gardens for producing wine and Rakia.

Oil and gas

Albania has the second largest oil deposits in the Balkans and the largest onshore oil reserves in Europe. Albania's crude output amounted to more than 1.2 million tonnes in 2013, including 1.06 million by Canada's Bankers Petroleum, 87,063 tonnes from Canada's Stream Oil and 37,406 tonnes by Albpetrol on its own. Three foreign firms produced the rest.^[21] Oil exploitation in Albania began 80 years ago on 1928 year in Kuçova Oil field and was continuously increasing and one years later in Patos, in sandstone reservoirs. Oil production in Albania was increasing continuously. During the periods 1929-1944 and 1945-1963 the total production was only from the sandstone reservoirs, while after 1963 year was and from the carbonate reservoirs. Up to the 1963 year from the sandstones were produced 4 974 649 ton oil.^[22]

Albanian oil and gas is represents of the most promising albeit strictly regulated sectors of the economy. It has attracted foreign investors since the early nineties marking the beginning of reforms which transformed the public exclusive rights, control and responsibilities with regard to exploration and exploitation, to the private sector. Oil and gas reserves still remain property of the Albanian State which enters into agreements and grants rights with regard to evaluation, exploration, production, refining/processing and transport of the product.^[23]

Trans Adriatic Pipiline

The Trans Adriatic Pipeline is a pipeline project to transport natural gas from the Caspian Sea, starting from Greece via Albania and the Adriatic Sea to Italy and further to Western Europe.

TAP's route through Albania is approximately 215 kilometres onshore and 37 km offshore in the Albanian section of the Adriatic sea. It starts at Bilisht Qendër in the Korça region at the Albanian border with Greece, and arrives at the Adriatic coast 17 km north-west of Fier, 400 metres inland from the shoreline. A compressor station will be built near Fier, and an additional compressor is planned near Bilisht should capacity be expanded to 20 billion cubic metres (bcm). Eight block valve stations and one landfall station will be built along its route.^[24]

In the mountainous areas, approximately 51 km of new access roads will be constructed while 41 km of existing roads will be upgraded, 42 bridges refurbished and three new bridges built. In the summer of 2015, TAP started the construction and rehabilitation of access roads and bridges along the pipeline's route in Albania. The work is expected to be completed during 2016.^[24]

Tourism

A significant part of Albania's national income derives from tourism. In 2014, it directly accounted for 6% of GDP, though including indirect contributions pushes the proportion to just over 20%.^[25] Albania welcomed around 4.2 million visitors in 2012, mostly from neighbouring countries and the European Union. In 2011, Albania was recommended as a top travel destination, by Lonely Planet.^[26] In 2014, Albania was nominated number 4 global touristic destination by the New York Times.^[27] The number of tourists has increased by 20% for 2014 as well.

The bulk of the tourist industry is concentrated along the Adriatic and the Ionian Sea coast. The latter has the most beautiful and pristine beaches, and is often called the Albanian Riviera. The Albanian coastline has a considerable length of 360 kilometres (220 miles), including the lagoon area which you find within. The coast has a particular character because it is rich in varieties of sandy beaches, capes, coves, covered bays, lagoons, small gravel beaches, sea caves etc. Some parts of this seaside are very clean ecologically, which represent in this prospective unexplored areas, very rare in Mediterranean area.^[28]

The increase in foreign visitors has been dramatic. Albania had only 500,000 visitors in 2005, while in 2012 had an estimated 4.2 million – an increase of 740% in only 7 years. Several of the country's main cities are situated along the pristine seashores of the Adriatic and Ionian Seas. An important gateway to the Balkan Peninsula, Albania's ever-growing road network provides juncture to reach its neighbors in north south, east, and west. Albania is within close proximity to all the major European capitals with short two- or three-hour flights that are available daily. Tourists can see and experience Albania's ancient past and traditional culture.^[29]

Seventy percent of Albania's terrain is mountainous and there are valleys that spread in a beautiful mosaic of forests, pastures, springs framed by high peaks capped by snow until late summer spreads across them.^[30]

Transport

Transport in Albania has undergone significant changes in the past two decades, vastly modernizing the country's infrastructure. Improvements to the road infrastructure, rail, urban transport, and airports have all led to a vast improvement in transportation. These upgrades have played a key role in supporting Albania's economy, which in the past decade has come to rely heavily on the construction industry.

Currently, there are three main motorways in Albania: the dual carriageway connecting Durrës with Vlorë, the Albania–Kosovo Highway, and the Tirana–Elbasan Highway. The A1 Albania–Kosovo Highway links Kosovo to Albania's Adriatic coast: the Albanian side was completed in June 2009,^[31] and now it takes only two hours and a half to go from the Kosovo border to Durrës. Overall the highway will be around 250 km (155 mi) when it reaches Prishtina. The project was the biggest and most expensive infrastructure project ever undertaken in Albania. The cost of the highway appears to have breached €800  million, although the exact cost for the total highway has yet to be confirmed by the government.

Two additional highways will be built in Albania in the near future: Pan-European Corridor VIII, which will link Albania with the Republic of Macedonia and Bulgaria, and the north-south highway, which corresponds to the Albanian side of the Adriatic–Ionian motorway, a larger regional highway connecting Croatia with Greece along the Adriatic and Ionian coasts. When all three corridors are completed Albania will have an estimated 759  kilometers of highway linking it with all its neighboring countries: Kosovo, the Republic of Macedonia, Montenegro, and Greece.

From 1989 to 1991, because of political changes in the Eastern European countries, Albania adhered to the International Civil Aviation Organization (ICAO), opened its air space to international flights, and had its duties of Air Traffic Control defined. As a result of these developments, conditions were created to separate the activities of air traffic control from Albtransport. Instead, the National Agency of Air Traffic (NATA) was established as an independent enterprise. In addition, during these years, governmental agreements of civil air transport were established with countries such as Bulgaria, Germany, Slovenia, Italy, Russia, Austria, the UK and Macedonia. The Directory General of Civil Aviation (DGCA) was established on 3 February 1991, to cope with the development required by the time. Albania has one international airport, the Tirana International Airport Nënë Tereza, which is linked to many European destinations. It has seen a dramatic rise in passenger numbers and aircraft movements since the early 1990s. The Airport handles over 1.9 million passengers per year. It is the only port of entry for air travelers to Albania. The airport is named after Mother Teresa, an Albanian Roman Catholic nun and missionary. Albania plans to build two new airports which will mainly serve the tourism industry.

Albania's main seaports are Durrës, Vlorë, Sarandë, and Shëngjin. By 1983 there was regular ferry, freight, and passenger services from Durrës to Trieste, Italy. In 1988 ferry service was established between Sarandë and the Greek island of Corfu. A regular lake ferry linked the Macedonian town of Ohrid with Pogradec. The Port of Durrës is one the largest ports in the Adriatic Sea. As of 2014, the port ranks as the largest passenger port in Albania and one of the largest passenger port in the Adriatic Sea, with annual passenger volume of approximately 1.5 million.

The railways in Albania are administered by the national railway company Hekurudha Shqiptare (HSH) (which means Albanian Railways). It operates a 1,435 mm (4 ft 8 ¹⁄₂ in) gauge (standard gauge) rail system in Albania. All trains are hauled by Czech-built ČKD diesel-electric locomotives.

The railway system was extensively promoted by the totalitarian regime of Enver Hoxha, during which time the use of private transport was effectively prohibited. Since the collapse of the former regime, there has been a considerable increase in car ownership and bus usage. Whilst some of the country's roads are still in very poor condition, there have been other developments (such as the construction of a motorway between Tirana and Durrës) which have taken much traffic away from the railways.

Statistics

Macroeconomic indicators

GDP (PPP): $34.247 billion^[1] (2016)

GDP per capita (PPP): $11.700^[1] (2015)
country comparison to the world: 95

GDP - real growth rate: 3.5% (2011)
country comparison to the world: 109

Inflation: 3.5% (2010)
country comparison to the world: 114

Unemployment: 13.3% (2010 est)
country comparison to the world: 141

Industry

Industrial production growth rate: 3.4% (2015 est.)
country comparison to the world: 71

Agriculture

Products: wheat, maize, potatoes, vegetables, fruits, sugar beets, grapes; meat, dairy products

Foreign trade

Exports: $3.1 billion (2014 est.)
country comparison to the world: -

Imports: $5.8 billion (2014 est.)
country comparison to the world: -

Import partners: Italy 45.6%, Greece 7.8%, Turkey 7.4%, Germany 5.6%, Switzerland 5%, China 4.2% (2014)

Remittances: $600 million (2014 est.)

Current account balance: -$1.704 billion (2014 est.)
country comparison to the world: 152

Foreign exchange reserves: $2.479 billion (2008)
country comparison to the world: 103

Energy

Electricity – production: 6.99 billion kWh (2009)
country comparison to the world: -

Electricity – production by source:

• fossil fuel: 2.9%
• hydro: 97.1%
• other: 0%
• nuclear: 0% (2007)

Electricity

• Consumption: 6.593 billion kWh (2009)

country comparison to the world: 102

• Exports: 0 kWh (2009)
• Imports: 1.884 billion kWh (2009 est.)

Oil

• production: 24.000 barrels per day (3.8157 m³/d) (2014)

country comparison to the world: 94

• consumption: 36,000 barrels per day (5,700 m³/d) (2009)

country comparison to the world: 107

• exports: 748.9 barrels per day (119.07 m³/d) (2005 est.)
• imports: 24,080 barrels per day (3,828 m³/d) (2007 est.)
• proved reserves: 199,100,000 barrels (31,650,000 m³) (January 1, 2008)

Natural gas

• production: 30 million m³ (2006 est.)

country comparison to the world: 84

• consumption: 30 million m³ (2006 est.)

country comparison to the world: 108

• exports: 0 cu m (2007 est.)
• imports: 0 cu m (2007 est.)
• proved reserves: 849.5 million m³ (January 1, 2008 est.)

country comparison to the world: 100

Exchange rates

• Lekë per US dollar: 79.546 (2008), 92.668 (2007), 98.384 (2006), 102.649 (2005), 102.78 (2004), 121.863 (2003), 140.155 (2002), 143.485 (2001), 143.709 (2000), 137.691 (1999)

See also

• Agriculture in Albania
• Economy of Europe
• List of Albanian companies
• List of banks in Albania
• Bank of Albania

References

•  This article incorporates public domain material from the CIA World Factbook document "2006 edition".
• From 2003,  This article incorporates public domain material from the United States Department of State website http://www.state.gov/r/pa/ei/bgn/index.htm (Background Notes).
• From 2007, International Monetary Fund

Further reading

• Bitzenis, Aristidis, and Leslie T. Szamosi. "Entry Modes and the Determinants of Foreign Direct Investment in a European Union Accession Country: The Case of Albania." Journal of East-West Business 15, no.3-4 (2009): 189-209.
• Feilcke-Tiemann, Adelheid. "Albania: Gradual Consolidation limited by Internal Political Struggles". Southeast European and Black Sea Studies 6, no. 1 (2006):25-41.

External links

• Bank of Albania (official site)
• Albania Economy Data from Quandl
• Ministry of Finance of Albania Official Website
• Comprehensive Balkanalysis.com 2012 report on Albania oil sector foreign investment
• Ministry of Economy, Trade, Energy, and Tourism of Albania Official Website
• Comprehensive current and historical economic data

Trade

• World Bank Trade Summary Statistics Albania 2012

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