Foreign direct investments in real terms increased last year, but Albania still ranks in the middle of the regional list in attracting these investments.

According to comparative data from the World Bank, the inward flows of foreign investment in Albania last year were 7.6% of Gross Domestic Product (GDP), up from the previous year’s level of 6.8%.

With this figure, Albania ranks third in the Western Balkans region, after Montenegro and Kosovo. For the past year, Montenegro attracted foreign direct investments amounting to 14.3% of its GDP, with a considerable difference from other countries in the region.

After Montenegro, Kosovo follows with 8.6% of GDP, followed by Albania with 7.6% of GDP. In comparison to other Western Balkan countries, Albania lags behind North Macedonia, where the inward flows of Foreign Direct Investments last year constituted 6.4% of GDP, and Bosnia and Herzegovina, with 2.6% of GDP.

Although foreign direct investments have reached record values in recent years in absolute terms, their value relative to GDP is far from historical highs. Based on World Bank data, the highest level of this indicator was reached in 2009 when foreign direct investments constituted 11.2% of GDP. In the last decade, the highest level was recorded in 2013, with 9.8% of GDP, and subsequent values have been declining. The year 2021 marked the lowest level in the last 15 years, with foreign direct investment flows at 6.8% of GDP.

According to data from the Bank of Albania, foreign direct investments last year reached a value of 1.37 billion euros, an increase of 33% compared to the previous year and the highest value ever recorded.

Reinvested earnings accounted for more than 53% of the total foreign direct investments.

In recent years, reinvested profits in value have dominated the new flows of foreign direct investments and have compensated for a part of the decline in new investment flows from abroad. Large values ​​of reinvested profits are particularly typical in sectors such as hydrocarbon extraction or banking and financial services.

High crude oil prices starting from the end of 2021 and most of 2022 have played a positive role in boosting new investments, aiming to increase production quantities.

The financial sector, especially the banking sector, generally characterizes the use of a large portion of profits to increase capital to support the expansion of bank activity. However, in recent years, reinvested profits in the banking sector have also increased due to higher capital requirements imposed by the Bank of Albania.

Regarding new investment flows, a sector that has seen significant growth in recent years is that of non-current assets.