Albania

Albania has made significant development progress since its transition from a centralized to a free-market economy, and it became an upper-middle-income country in 2011 because of its economic growth. The country is implementing important structural reforms that will support equitable growth, raise productivity and competitiveness in the economy, create more jobs, and improve governance and public service delivery.

The government’s focus is now on sustainable growth with a special focus on tourism, agriculture, and digitization, as well as building resilience. Sustaining the pace of reforms is a priority. Albania opened accession talks with the European Union in mid-October 2024. With most negotiation chapters opened, and a solid timeline toward membership, Albania is making significant strides in this process.

The World Bank Group and other partners are working together to support the government in overcoming its challenges and implementing Albania's longer-term vision.

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Albania’s economy grew by 3.4% year-on-year in the first quarter of 2025, supported by strong foreign demand and a slight moderation in domestic demand. Inflation stayed below 3%, poverty declined amid stronger labor markets, and public debt continued on a downward path. Though external risks persist, progress on EU accession is likely to support investor confidence, policy continuity, and long-term growth. On the supply side, services and construction drove  activity, despite a tapering of tourism growth, offsetting declines in agriculture and other parts of industry.

Labor market conditions improved, unemployment edged down, and employment rose. Service-sector hiring offset job losses in agriculture in the first quarter of 2025, lowering the unemployment rate to 8.7% and lifting the employment rate (ages 15 – 64) to 69.5% for both men and women.

Despite rising wage pressures, inflation remained low at 2.2% over the first seven months of 2025, supported by a stronger lek and low Eurozone inflation.

In the first half of 2025, fiscal policy supported demand through moderate loosening, with the overall fiscal surplus narrowing to 2.7% of GDP from 4.3% a year earlier.

Looking ahead, Albania’s economic growth is projected to moderate to 3.7% in 2025 and 3.5% in the medium term, amid global trade uncertainties and a shifting international outlook.

Faster implementation of EU-backed reforms could significantly lift per-capita income growth by up to 3.1% above the baseline, addressing structural headwinds and accelerating convergence with EU living standards.

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The World Bank Group is one of Albania's main sources of development assistance, playing a major role in supporting reforms, strengthening institutions, and financing investments across the full range of sectors.

The current lending portfolio of the International Bank for Reconstruction and Development (IBRD) is approximately $600 million, comprising seven projects in the transport, water, agriculture, digitization, environment, and social sectors. The portfolio also includes two trust funds, totaling $1.6 million.

Considering the substantial progress made in the Program for Results (PforR) Improving Equitable Access to High Standard Public Services Through GovTech, an additional financing of $80 million was signed in April 2025. This will focus on public procurement and public financial management through e-procurement and the Financial Management Information System, both at central and local levels. The Second Development Policy Loan, signed in April 2025, will strengthen revenue mobilization, advance renewable energy, improve public sector efficiency, and reduce environmental degradation and emissions.

The International Finance Corporation (IFC) brings its global expertise to Albania through strategic advisory services and investment projects to support the transition to a diversified, higher value-add, export-based growth model by fostering competitiveness and sustainable growth. IFC is working to attract private sector participation in key sectors such as renewable energy, green finance, infrastructure, retail, and tourism. Its portfolio includes two lending projects and 13 regional advisory projects. The IFC investments include Balfin Group, a large corporation with diversified activities ($41 million) and Voltalia, a French investor developing 240MW photovoltaic (PV) parks ($34 million). IFC’s advisory activities in Albania include projects in digital finance, agriculture finance, climate finance, eco-industrial parks, and logistic services.

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The World Bank Group strategy in Albania focuses on supporting the country's efforts to create more jobs, strengthen human capital, and enhance its resilience to shocks. The strategy is outlined in the Country Partnership Framework (CPF) for the period FY23-FY27.

Key areas include:

1. Economic Growth and Competitiveness: The World Bank Group aims to support Albania in implementing structural reforms that promote equitable growth, raise productivity, and improve competitiveness in the economy. This includes efforts to create more jobs and improve governance and public service delivery.

2. Human Capital Development: The World Bank Group is committed to strengthening human capital in Albania by improving education, healthcare, and social protection systems. This includes initiatives to boost human capital and promote more sustainable and inclusive growth.

3. Resilience to Shocks: Enhancing Albania's resilience to climate change and natural hazards is vital for protecting lives, homes, and businesses. This involves projects aimed at improving road and bridge asset management, as well as scaling up renewable energy and energy efficiency.

4. Environmental Sustainability: Key measures include enhancing the energy market framework, protecting the environment, and promoting green development.

The World Bank Group’s strategy in Albania is comprehensive, covering economic, infrastructural, social, and environmental aspects to help the country achieve sustainable development and resilience.

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