Albania’s economy is forecasted to experience a 2.5 percent growth rate this year, according to the autumn projections released by the European Bank for Reconstruction and Development (EBRD). This prediction remains consistent with the spring 2023 report.
In the first quarter of 2023, Albania’s economy saw a 2.7 percent expansion, primarily driven by reduced demand, despite a decrease in inflation. The export of goods notably declined due to decreased foreign demand and the strong performance of the Albanian lek currency.
The lek’s value was 12 percent higher in July 2023 compared to the previous year, reaching a historically high level. This was supported by an increase in tourism, continuous remittances, and direct investments.
EBRD’s analysis indicates that the currency’s appreciation partially offset the inflationary impact, allowing for a suitable monetary policy with an expected 3 percent interest rate by the end of August 2023.
EBRD predicts that economic growth will continue at an average rate of 2.5 percent in 2023, considering Albania’s vulnerabilities and the economic outlook of its main trading partner, Italy, along with persistently high inflation in food items, which has been affecting disposable incomes.
On the positive side, the tourism sector has shown remarkable strength, with a 30 percent increase in visitors during the first seven months of 2023. This is expected to contribute to both short-term and medium-term growth.
Aligned with the anticipated global economic recovery, it is expected that Albania’s economic growth will approach its full potential, reaching 3.3 percent in 2024.
The Western Balkan economies faced challenges due to weakened demand in their European trading partners. However, this was partially offset by the strong performance of service-based economies in Albania, Montenegro, and Kosovo.
GDP growth is expected to further slow down this year, especially as key Eurozone partners experience reduced growth rates, with a recession predicted in Germany. Meanwhile, inflation, while decreasing, continues to impact household consumption.
In pursuit of debt financing, Balkan economies are increasingly turning to external markets. This is evidenced by Serbia, North Macedonia, and Albania issuing Eurobonds in the first half of 2023, and Kosovo, North Macedonia, and Serbia engaging in ongoing financing programs with the International Monetary Fund.
