Economic growth in 2024 in Albania

Description

Albania experienced a moderate economic growth of 3.96% in 2024.

This growth was primarily driven by:

• Domestic consumption
• Investments in construction and real estate
• Supportive fiscal policies

However, the decline in key sectors such as:

• Industry
• Agriculture
• Exports

…revealed underlying structural challenges that require continued reforms and strategic investments to enhance competitiveness and address the imbalances in the balance of payments.

In 2024, Albania’s GDP recorded a growth of 3.96%, reflecting a modest yet positive economic expansion compared to 2023. This growth indicates a consolidation process of the economy following the numerous challenges the country has faced in recent years.

The growth was supported by several key sectors such as public administration, education, health, construction, and real estate, which contributed significantly to the demand for services and economic activities.

However, other sectors such as industry, energy and water, as well as agriculture, experienced a decline, reflecting the structural and macroeconomic challenges of the Albanian economy.

Drivers of economic growth

Domestic Consumption

The final consumption of the population increased by 3.26% compared to 2023, making it one of the main drivers of economic growth. This consumption reflects a sustainable purchasing power and an increase in demand for goods and services, especially in the services and daily goods sectors.

This has enabled an expansion of economic activities, particularly in public services, education, and health, which experienced high demand throughout 2024.

Growth in Public Services

Public administration, education, and health significantly contributed to GDP growth. The increased demand for public services, along with continued investment in these sectors, helped create new jobs and increased investments in infrastructure and social services.

This growth had a direct impact on improving living conditions and supporting vulnerable groups of society.

Investments in Construction and Real Estate

Investments in construction and real estate were another important factor in economic growth. The demand for construction has seen sustainable growth, particularly in infrastructure and real estate development.

This sector has contributed to employment opportunities and stimulated demand for materials and services, thus supporting Albania’s economic growth.

Effect of Taxes and Fiscal Policy

Another important factor was the increase in net taxes on products, which contributed 14.04%. This development helped improve the fiscal balance of the state, providing more resources for financing public investments and essential services for the sustainable development of the economy.

The increase in fiscal revenues enabled improvements in public services and infrastructure at both national and local levels.

Declines and economic challenges

Industry, Energy, and Water

The industry, energy, and water sector experienced a sharp decline of 7.73%, contributing to a drop in production and industrial activities. This sector faced difficulties due to high energy prices and low international demand for goods produced in Albania.

Moreover, the energy sector is sensitive to changes in climate conditions and political factors, which have affected energy production and supply, thereby creating challenges for the economy and for sectors linked to energy.

Agriculture

The agriculture sector recorded a decline of 2.70%, which may be linked to structural problems and difficulties related to the distribution of wheat and agricultural products. Additionally, climate change negatively affected crop yields, causing reduced production and an increase in imports of food products.

The decline in agriculture had a direct impact on consumption and increased food imports, worsening the balance of payments and placing greater strain on household budgets.

Food Security and Imports

The fall in the agricultural sector led to a greater need for imports, including food products. This rise in imports reflected high demand for foreign goods and had a negative impact on the balance of payments.

This resulted in an increased trade deficit and added pressure to Albania’s external balance, requiring further focus on improving competitiveness and exports.

Government Consumption and Public Investments

Government consumption declined by 0.59%, indicating a possible withdrawal from public investments due to a period of uncertainty.

This decrease may have negatively impacted certain sectors, especially those requiring large investments, such as infrastructure and social services. Meanwhile, this focus on savings may have contributed to maintaining fiscal stability, but also potentially caused delays in the implementation of key projects essential for the long-term development of the economy.

Balance of Payments and the Impact of Internationalization

Exports and Imports

In 2024, exports experienced a slight decline of 1.73%, while imports increased by 3.12%. This development led to a widening of the trade deficit, as Albania increased its demand for foreign goods while its export capacity decreased.

🔻 This trade imbalance presents a significant challenge for the economy, as it has contributed to the growth of the deficit and has affected the country’s overall economic stability.

Currency stability and economic consequences

The combination of rising imports and declining exports has resulted in a deficit in the balance of payments, which in turn has affected the stability of the national currency.

The increased pressure on the local currency may necessitate cautious intervention by monetary authorities to preserve the stability of the exchange rate and public finances.

Way forward: Focus areas

To ensure sustainable and balanced growth, the Albanian economy must:

• Improve productivity in underperforming sectors
• Enhance international competitiveness
• Address trade deficits through a diversified export base
• Invest in long-term reforms targeting structural weaknesses

A strategic focus on these priorities will be crucial for preserving macroeconomic stability and promoting inclusive development.