What can boost economic growth in Albania by 2025?
Economic growth in Albania in 2025 could be driven by a combination of economic, institutional and strategic factors.
From previous analyses, data intersections and developments we think that there are some of the main elements that could contribute:
The first impact should address the improvement of the investment and doing business climate.
Albania has the potential to attract foreign investment due to its strategic position and low labor costs. However, investors are often deterred by bureaucracy, corruption and an unpredictable tax system.
The necessary measures to finalize the management of public administration reform and tax reform in particular. Simplifying administrative procedures, reducing the bureaucratic burden can attract more foreign and domestic investors in terms of quality and in line with the requirements for a diversified economy for resilience to the challenges of today and tomorrow.
While it is necessary to increase transparency and improve the digitalization of public services, which have opened up many problems and delays, which are in fact the main purpose why services have value when they are digitalized.
But, on the other hand, although we see a draft strategy for revenues that is promoted as part of a new approach in favor of stabilizing tax policies and avoiding frequent legal changes, in fact, various initiatives by the administration with electoral political goals and mindset have not shown that it is happening as declared.
The promotion of public-private partnerships (PPP) for large infrastructure projects seems to be quite problematic in all directions. Of course, the findings and recommendations given in this regard are sufficient to prevent further dispersion towards quantity at the expense of quality and economic sustainability.
We believe that the promotion of small and medium-sized enterprises (SMEs) with a different approach to easier and cheaper financing should be the first measure that can be started in the first months of 2025.
Meanwhile, business support centers for innovation and export seem to replace or transform the “Business House” initiative.
Other measures, concurrent with the reform of the administration, should manage the shadows for investment incentives. The provision of fiscal incentives for strategic sectors such as energy, technology, tourism and agriculture should be subject to a responsible and debatable scan with all experts and interest groups, in order to move away from the current model.
The second impact should be reformatted, driven by the development of necessary infrastructure and not by political and short-term ambitions.
Albania has made improvements in roads and ports, but there are still shortcomings in inter-regional and domestic infrastructure connectivity.
Increased investment in roads, ports and energy and associated logistics could improve Albania’s competitiveness and increase connections with regional and international markets. However, infrastructure is not yet serving as an economic catalyst, but as a financial burden on the economy and households. The modernization of water and sanitation infrastructure, especially in rural and tourist areas, is still at levels that suffer most not from lack of funds but from problems stemming from corruption and electoral projects.
Key measures should be driven at a higher pace by digital infrastructure. Improving internet access and developing new technologies to support the information and communication technology sector.
The third impact is the attention with special measures towards the diversification of the economy.
Promoting sustainable tourism and developing new tourist offers (cultural, medical, natural) is one of the approaches.
Meanwhile, agriculture and agribusiness should be the second approach. Investments in new technologies for smart agriculture are needed to increase the production and exports of agricultural products.
Also, renewable energy should continue to be influential in economic development. Focusing on the development of clean energies such as solar and wind energy along with other sources (gas, biomass, etc.) remain areas that need to be developed at a rapid pace
But what requires more focus to become influential in cross-sectoral development and to influence sustainable growth is the technology package. Focusing on technology for development in 2025 can play a crucial role in modernizing the economy, improving services and promoting innovation.
The fourth impact is human resource development.
The Albanian workforce is still relatively young, but often lacks the skills needed for high value-added sectors. Existing measures have had gaps and poor efficiency in terms of vocational education and training. New measures should address the adaptation of curricula to labor market demands and the training of the workforce for new economic sectors.
Likewise, the various measures and organizations to promote the development of the country by the return of the diaspora have problems in terms of the lack of vision and proper accommodation related to the weak investment climate. Encouraging Albanian professionals living abroad to invest and contribute to economic development cannot have the expected impact with the current approach. This community that is living in a different model should be allowed to co-lead development processes and not be used as an instrument for the short-term policies of the government and the political class.
The fifth impact with a high impact value is the promotion of political and legal stability.
If hopes for the rule of law are thought to be addressed only with judicial reform, then this is fraught with many negative consequences regarding the neglect of transparent governance, respect for human rights and the building of strong institutions at all levels.
An exclusive focus on justice may neglect reforms in public administration, the police, the tax system and other vital sectors.
If the judicial system is reformed, but corruption, abuse of power and lack of accountability remain problematic in other sectors, then the benefits of reform are limited. In the absence of concrete results in other aspects, citizens may lose faith not only in the reform, but also in the concept of the rule of law.
All that 2025 should convey is the fight against corruption. Concrete measures to reduce corruption and guarantee a fair environment for businesses should start from correcting meritocracy, distancing and cleansing from political patronage, and should include a systematic and comprehensive approach.
The sixth impact is to encourage the administration to deepen its homework towards European Integration.
Progress in the European Union accession process can promote structural reforms and attract more investment from EU countries. In a sectoral approach, the accession process can accelerate reforms in areas such as trade, agriculture and education.
It is true that Albania has the potential for economic growth in 2025, just as it has had even greater potential before. But this potential can be converted into added value, well-being and development that is valid for all together only if these elements as above are addressed with long-term strategies and in cooperation with the private sector, civil society, the diaspora and international partners.
A balanced approach between institutional reforms, infrastructure development and support for strategic sectors can create a more sustainable and competitive economy. Inclusion is the key to enabling the opening of many doors that have been closed until now.
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