Growth is expected to moderate to 3.6% in 2023, in the context of tight global financial conditions, limited economic growth in Europe, and the completion of post-earthquake reconstruction programs. Tourism and construction are expected to drive exports, consumption, and investment growth at rates similar to pre-pandemic levels. The inflation rate is projected to start converging toward the 3% target by 2024.  

Albania’s GDP increased by 2.7% in the first quarter of 2023. Services led supply-side growth, followed by construction and manufacturing. Consumption and investment were the main growth drivers on the demand side. Increased income from employment, credit growth, and high tax revenues all point to a greater contribution to GDP from consumption, investment, and net exports in the second and third quarters.  

Growth is expected to moderate to 3.6% in 2023, in the context of tight global financial conditions, limited economic growth in Europe, and the completion of post-earthquake reconstruction programs. Tourism and construction are expected to drive exports, consumption, and investment growth at rates similar to pre-pandemic levels. The inflation rate is projected to start converging toward the 3% target by 2024.  

Further increases in food and energy prices are a key risk to growth, as they could affect real disposable income, slow poverty reduction and potentially constrain the fiscal space. As a small, open economy, Albania is highly exposed to external shocks, such as a recession in Europe or further tightening of financing conditions in international capital markets beyond the current year. Domestic risks emanate from natural disasters, public-private partnerships, and state-owned enterprises, in addition to fiscal risks stemming from the country’s hydropower-based energy sector that are mainly due to variation in hydrology.

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