The service sector in Albania has been experiencing dynamic developments since 2019, especially after the pandemic, yet its contribution to budget revenues and employment has remained largely stagnant over the past five years.
Examining the actual budget developments of 2022, the Ministry of Finance reported that the service sector accounted for 32% of total budget revenues, ranking it as the top contributor among other sectors. However, this position has remained unchanged over the past five years, despite the country witnessing a significant surge in visitor numbers during the last two years.
Revenue from the Tax Administration, inclusive of contributions, amounted to 286.3 billion Albanian lek, surpassing the previous year’s 251.5 billion lek, representing an annual increase of 13.8%, equivalent to 34.8 billion lek more.
Analyzing the data for the first half of 2022 regarding the contribution of different economic sectors to the total revenue from tax administration, it becomes evident that the “Service” sector holds the largest share at 32%, followed by the “Trade” sector at 30%, and the “Production” sector at 21%.
Regarding the distribution of value-added tax (VAT) within the country, the “Trade” sector continues to lead with 30%, followed by “Services” at 34%, and “Production” at 19%, underscoring their pivotal roles in generating VAT revenues.
Comparing to 2019 when the service sector contributed 35% of domestic VAT or 1 percentage point more than in 2022.
Together, the service and trade sectors accounted for about 54% of total tax revenues in 2022, a percentage almost identical to that of 2019.
Although the structure of Albania’s economy hasn’t undergone substantial changes in recent decades, the weight of the tourism sector has been experiencing robust growth.
Based on data from the Institute of Statistics (INSTAT), Albania’s economy reached approximately 4.5 trillion lek in 2022. Notably, hotels and restaurants saw their contribution increase to 11.8% of the total economy, a significant rise from the mere 2.3% in 2021.
The data also indicates that the trade sector retained a substantial share of the total economy’s turnover in the past year, accounting for 35.8%, although this represented a 3.8-percentage-point decrease compared to 2021.
The industry sector contributed 22.6% of total revenues, experiencing a modest 0.3% annual increase in 2022.
Even though the construction sector demonstrated robust growth in the previous year, its contribution to the total turnover was 9.1%, reflecting a -2.8-percentage-point decrease compared to 2021.
Interestingly, despite being the largest sector in terms of economic size, agriculture contributed a mere 0.5% to the total turnover of Albania’s economy in 2021, which marked a decline from the previous year.
The distribution of sector contributions to the total economic turnover underscores the need for enhanced productivity in various sectors. For instance, agriculture, despite its size, contributes less than 1% to wage employment and the overall turnover.
