About
Albania

Economy of Albania

Albania's economy has improved substantially over recent years and has outperformed many other countries in the region. However, it is still considered one of the poorest countries in Europe. According to the Bank of Albania, per capita income was $4,070 in 2009, and was expected to reach $4,200 in 2010. According to preliminary data by the World Bank's Poverty Assessment Program, 12.4% of the population lived below the poverty line in 2008, marking a considerable improvement from 25.4% in 2002; this decline in poverty levels was due mainly to higher per capita GDP. The official unemployment rate is 13.75%, with almost 60% of the workforce employed in the agricultural sector, although the construction and service industries have been expanding recently. Tourism has been boosted significantly by ethnic Albanian tourists from throughout the Balkans. GDP is comprised of services, including trade, hotels, and restaurants (21%), transport (5.5%), and communication (4.5%); agriculture (19%); construction (14%); industry (10%); and remittances (9%).

The Albanian economy has been partially sheltered from the global financial crisis and the economic downturn. Albania’s economy grew 2.8% in 2009, according to International Monetary Fund (IMF) data. However, a reduction in remittances from Albanian workers abroad and in demand for its exports has constrained economic activity.

During the global financial crisis, bank deposits shrank considerably and lower liquidity pushed commercial banks to tighten lending. While current bank deposits have reportedly surpassed pre-crisis levels and bank liquidity has improved, the demand for credit is still low. In December 2009, the growth rate of loans dropped to 10% from 35% in 2008. In general, the banking sector remains viable, well capitalized, and able to further finance the economy, as the ratio of loans to deposits, approximately 65%, is still low compared to Western standards.

Albania is trying to attract foreign direct investment (FDI) and promote domestic investment. Increasing FDI is a top priority for the Albanian Government, especially in light of the steady decrease of remittances. The Government of Albania has embarked on an ambitious program to improve the business climate by undertaking fiscal and legislative reforms and by improving infrastructure.

The recent investment in energy generation through new transmission lines and the privatization of the electrical distribution arm will address the lack of reliable energy supply, which was a major concern for businesses following power shortages during 2005-2007.

Heavy investments in the country’s main road corridors have contributed to improved transportation conditions. Completion of the 106 miles (170 km) of highway linking Durres with Kosovo will provide a major transportation corridor connecting markets in the central Balkans through Kosovo to the port of Durres. Similar large-scale infrastructure investments are needed to further improve Albania’s road transportation corridors and limited railway system and to expand the capacity of its sea ports and airports.

Albania was the last of the central and eastern European countries to embark on democratic and free market reforms, and it started from a disadvantaged position due to Hoxha's catastrophic economic policies. The democratically elected government that assumed office in April 1992 launched an ambitious economic reform program meant to halt economic deterioration and put the country on the path toward a market economy. However, the collapse of the infamous pyramid schemes in 1997 and the instability that followed were a tremendous setback. The country subsequently recovered and is aggressively pursuing its Euro-Atlantic integration agenda. In June 2006, the Albanian Government signed a Stabilization and Association Agreement (SAA) with the European Union, the first step in the EU accession process. In April 2009, Albania became a NATO member country and at the same time submitted its application for EU membership, both considered major milestones in the country’s history.

Albania’s economy has improved markedly over the last decade; reforms in infrastructure development, tax collection, property law, and business administration are progressing. Despite the effects of the recent global financial crisis and economic downturn, the country has outperformed many other countries in the region. During 2006-2009 the average growth rate was 5.5%, while for 2010 the Government of Albania anticipated growth reaching 4.1% (the IMF predicted 2.7%).

Albania still ranks as one of the poorest countries in Europe according to major income indicators, although per capita GDP figures do not fully capture remittance income from the extensive network of Albanians abroad and income from the informal market, which the IMF estimates at 30%-40% of GDP. Remittances, a significant catalyst for economic growth in the past, have experienced a decline over the last few years after peaking in 2007. The Bank of Albania estimates that remittances fell by 6% in 2009 compared to 2008, and their share of GDP declined to 9% in 2009. The reduction continued during the first three quarters of 2010, though on a smaller scale.

The Albanian banking sector survived the global financial crisis with sufficient liquidity, and the system has recovered from the sharp decline in deposits at the start of the crisis. Fiscal and monetary discipline has kept inflation relatively low, averaging roughly 2.6% per year during 2006-2009. Although the average inflation rate was expected to reach 3.6% for 2010, that is still within the Central Bank target of 3 plus or minus 1%. According to official estimates, the unemployment rate as of September 2010 was 13.52%.

Albania has put in place a liberal foreign investment regime, and the government is working to better the business climate through fiscal and legislative reforms and infrastructure improvements. FDI has increased significantly over the last few years and in 2009 reached almost $1 billion, up from $262 million in 2005. The Government of Albania has invested almost U.S. $2 billion in the country’s main road corridors, and it has pledged to invest at least another billion until 2013. Electricity supply has also improved, while the distribution system has been privatized.

Albania continues to be an import-oriented economy and, despite reforms, its export base remains small, narrow, and undiversified. In 2009, imports averaged 37% of GDP and exports only 9%, while export volume was approximately one-quarter the size of imports. Trade volume in 2009 fell by 3.2%, with imports declining by 2% and exports by 8.3%, a sign of the global economic downturn's impact. Exports picked up significantly during 2010 while imports experienced only a slight increase, although the rise in exports was due to an increase in domestically produced electricity fueled by record rainfalls. As of September 2010, exports rose by 60% year-on-year while imports rose by only 11%, increasing the coverage ratio of imports (by exports) from 24% in December 2009 to 34% in September 2010.

The Stabilization and Association Agreement (SAA) signed with the EU in June 2006 was the first step in Albania's EU accession process, and a related Interim Trade Agreement entered into force the following December. On December 19, 2006, Albania joined other countries in the region and signed the Central European Free Trade Agreement (CEFTA.) Albania also has free trade agreements with Turkey (signed in 2006 and entered into force on May 2008) and the European Free Trade Association (EFTA member states are Iceland, Liechtenstein, Norway, and Switzerland).

The EU remains Albania’s main trading partner, providing 64.1% of Albania’s imports and receiving 70.2% of exports as of September 2010. Trade with Italy and Greece, although steadily declining since 2008, continues to represent the largest share of EU trade, with a combined 40.8% of imports and 56.4% of exports as of September 2010. Other major trading partners include Turkey, China, and Germany. The impact of CEFTA in Albania’s trade with member countries has been small.

Trade with the United States continues to account for an insignificant part of Albania's trade volume, focusing on a narrow range of goods and products. As of September 2010, total trade volume with the U.S. accounted for 3% of Albania’s total trade volume, up from 2.4% in September 2009. Agricultural products, footwear, and textiles are the main exports to the United States, while imports from the U.S. are generally from food (mainly meat), transportation equipment (vehicles), machinery, and computer and electronic equipment.

Real GDP growth (2009 est.): International Monetary Fund 2.8%, Ministry of Finance 3.3%; (2010 proj.): International Monetary Fund 2.6%, Ministry of Finance 4.1%.

Inflation rate (2009): annual average 2.3%; (as of November 2010): 2.8%. (Albanian Institute of Statistics)

Unemployment rate (2009): 13.75%; (as of September 2010): 13.52%. (Albanian Institute of Statistics)

Natural resources: Oil, gas, coal, iron, copper and chrome ores.

Geography of Albania

Albania shares a border with Greece to the south/southeast, Macedonia to the east and Yugoslavia and Kosovo to the north. Eastern Albania lies along the Adriatic and Ionian Sea coastlines. Albania's primary seaport is Durres, which handles 90% of Albania's maritime cargo.

Official Name: Republic of Albania

Area: 28,748 sq. km. (slightly larger than Maryland).

Major cities: Capital--Tirana (700,000). Others--Durres (400,000), Shkoder (81,000), Vlore (72,000).

Terrain: Situated in the southwestern region of the Balkan Peninsula, Albania is predominantly mountainous but flat along its coastline with the Adriatic Sea.

Climate: Mild temperate--cool, wet winters; dry, hot summers.

Government of Albania

Albania’s unicameral People's Assembly (Kuvendi Popullor) consists of 140 seats; a regional proportional system determines representation. All members serve 4-year terms. The Speaker of Parliament (Jozefina Topalli) has two deputies, who along with eight permanent parliamentary commissions assist in the process of legislating Albanian affairs.

The President is the head of state. The current President was elected by a three-fifths majority vote of all Assembly members. However, changes to the Constitution in 2008 mean the next President will need only a simple majority in the Parliament to be elected. The President serves a term of 5 years with the right to one re-election. Although the position is largely ceremonial, the Constitution gives the President authority to appoint and dismiss some high-ranking civil servants in the executive and judicial branches, and this authority can have political implications. The President is also commander in chief of the armed forces, and chairs the National Security Commission. The current President's term expires on July 23, 2012.

The Prime Minister is appointed by the President and approved by a simple majority of all members of the Assembly. The Prime Minister serves as the Chairman of the Council of Ministers (cabinet), which consists of the Prime Minister, Deputy Prime Minister, and other ministers. Members of the Council of Ministers are nominated by the Prime Minister, decreed by the President, and approved by a parliamentary vote.

Albania's civil law system is similar to that of other European countries. The court structure consists of a Constitutional Court, a Supreme Court, and multiple appeal and district courts. The Constitutional Court is comprised of nine members appointed by the Assembly for one 9-year term. The Constitutional Court interprets the Constitution, determines the constitutionality of laws, and resolves disagreements between local and federal authorities. The Supreme Court is the highest court of appeal and consists of 11 members appointed by the President with the consent of the Assembly for 9-year terms. The President chairs the High Council of Justice, which is responsible for appointing and dismissing other judges. The High Council of Justice is comprised of 15 members--the President of the Republic, the Chairman of the High Court, the Minister of Justice, three members elected by the Assembly, and nine judges of all levels elected by the National Judicial Conference.

The remaining courts are divided into three jurisdictions: criminal, civil, and military. There are no jury trials under the Albanian system of justice.

A college of three judges, sometimes referred to as a "jury" by the Albanian press, renders court verdicts.

President--Bamir Topi

Prime Minister--Sali Berisha

Deputy Prime Minister--Ilir Meta

Minister of Defense--Arben Imami

Minister of Foreign Affairs--Edmond Haxhinasto

Type: Parliamentary democracy.

Constitution: Adopted by popular referendum November 28, 1998.

Independence: November 28, 1912 (from the Ottoman Empire).

Branches: Executive--President (chief of state), Prime Minister (head of government), Council of Ministers (cabinet). Legislative--Unicameral People's Assembly or Kuvendi Popullor--140 seats (100 members elected by direct popular vote; 40 by proportional vote; all serve 4-year terms). Judicial--Constitutional Court, High Court, multiple district and appeals courts.

Suffrage: Universal at age 18.

Main political parties: Democratic Party of Albania (PD); Albanian Socialist Party (PS); Socialist Movement for Integration (LSI); Albanian Republican Party (PR); Demo-Christian Party (PDK); Union for Human Rights Party (PBDNJ); New Democracy Party (PDR); Social Democratic Party (PSD); Social Democracy Party (PDS).

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History of Albania

Following the split of the Roman Empire in 395, the Byzantine Empire established its control over present-day Albania. In the 11th century, Byzantine Emperor Alexius I Comnenus made the first recorded reference to a distinct area of land known as Albania and to its people.

The Ottoman Empire ruled Albania from 1385-1912. During this time, much of the population converted to the Islamic faith, and Albanians also emigrated to Italy, Greece, Egypt and Turkey. Although its control was briefly disrupted during the 1443-78 revolt, led by Albania's national hero, Gjergj Kastrioti Skenderbeg, the Ottomans eventually reasserted their dominance.

In the early 20th century, the weakened Ottoman Empire was no longer able to suppress Albanian nationalism. The League of Prizren (1878) promoted the idea of an Albanian nation-state and established the modern Albanian alphabet. Following the conclusion of the First Balkan War, Albanians issued the Vlore Proclamation of November 28, 1912, declaring independence. Albania's borders were established by the Great Powers in 1913. Albania's territorial integrity was confirmed at the Paris Peace Conference in 1919, after U.S. President Woodrow Wilson dismissed a plan by the European powers to divide Albania among its neighbors.

During the Second World War, Albania was occupied first by Italy (1939-43) and then by Germany (1943-44). After the war, Communist Party leader Enver Hoxha, through a combination of ruthlessness and strategic alliances, managed to preserve Albania's territorial integrity during the next 40 years, but exacted a terrible price from the population, which was subjected to purges, shortages, repression of civil and political rights, a total ban on religious observance, and increased isolation. Albania adhered to a strict Stalinist philosophy, eventually withdrawing from the Warsaw Pact in 1968 and alienating its final remaining ally, China in 1978.

Following Hoxha's death in 1985 and the subsequent fall of Communism in 1991, Albanian society struggled to overcome its historical isolation and underdevelopment. During the initial transition period, the Albanian Government sought closer ties with the West in order to improve economic conditions and introduced basic democratic reforms, including a multi-party system.

In 1992, after the sweeping electoral victory of the Democratic Party, Sali Berisha became the first democratically elected President of Albania. Berisha began a more deliberate program of economic and democratic reform but progress on these issues stalled in the mid-1990s, due to political gridlock. At the same time, unscrupulous investment companies defrauded investors all over Albania using pyramid schemes. In early 1997, several of these pyramid schemes collapsed, leaving thousands of people bankrupt, disillusioned, and angry. Armed revolts broke out across the country, leading to the near-total collapse of government authority. During this time, Albania's already inadequate and antiquated infrastructure suffered tremendous damage, as people looted public works for building materials. Weapons depots all over the country were raided. The anarchy of early 1997 alarmed the world and prompted intensive international mediation.

A UN Multinational Protection Force restored order, and an interim national reconciliation government oversaw the general elections of June 1997, which returned the Socialists and their allies to power at the national level. President Berisha resigned, and the Socialists elected Rexhep Meidani as President of the Republic.

During the transitional period of 1997-2002, a series of short-lived Socialist-led governments succeeded one another as Albania's fragile democratic structures were strengthened. Additional political parties formed, media outlets expanded, non-governmental organizations and business associations developed. In 1998, Albanians ratified a new constitution via popular referendum, guaranteeing the rule of law and the protection of fundamental human rights and religious freedom. Fatos Nano, Chairman of the Socialist Party, emerged as Prime Minister in July 2002.

On July 24, 2002, Alfred Moisiu was sworn in as President of the Republic. A nonpartisan figure, nominally associated with the Democratic Party, he was elected as a consensus candidate of the ruling and opposition parties. The peaceful transfer of power from Meidani to Moisiu was the result of an agreement between the parties to engage each other within established parliamentary structures. This "truce" ushered in a new period of political stability in Albania, making possible significant progress in democratic and economic reforms, rule of law initiatives, and the development of Albania's relations with its neighbors and the U.S.

The "truce" between party leaders began to fray in summer 2003 and progress on economic and political reforms suffered noticeably due to political infighting. The municipal elections of 2003 and national elections of 2005 were an improvement over past years, adding to the consolidation of democracy despite the continued presence of administrative errors and inaccuracies in voter lists.

In 2005, the Democratic Party and its allies returned to power, pledging to fight crime and corruption, decrease the size and scope of government, and promote economic growth. Their leader, Sali Berisha, was sworn in as Prime Minister on September 11, 2005.

Since the election, Prime Minister Berisha's government has made the fight against corruption and organized crime its first priority and has begun administrative and legal reforms toward that end. This brought repeated clashes with the opposition, which condemned the government's approach as unconstitutional and an attempt to undermine independent institutions. Both sides remain combative over a range of political and substantive issues.

Another politically contentious process was the pre-electoral period prior to the 2007 local elections. Although the February 18, 2007 local elections were generally peaceful and democratic, over-politicized debate during the preceding months resulted in procedural and administrative problems during the conduct of the elections. A major positive step forward was the performance of the police force.

The fragility of the Albanian electoral system was tested again during the parliamentary by-election in zone 26 (Shijak) on March 11, 2007. The left-wing opposition parties withdrew their commissioners from the polling stations and the counting center, in spite of prior concessions from the Central Elections Commission (CEC) to the opposition's demands. Opposition commissioners left and took with them one of the seals that mark the ballots. By midday, the opposition candidate also announced his withdrawal from the parliamentary race. However, the right of citizens to vote prevailed and the process continued thanks to the technical arrangements of the CEC. The only visible sign of violence was the wounding of a Democratic Party commissioner, who was fired upon by a militant.

Both elections were an indication of lack of political will to cooperate and of the imminent need for a comprehensive electoral reform of the present Albanian electoral system.

On July 20, 2007 President Bamir Topi was elected within Parliament after six members of the opposition coalition broke ranks to vote for his candidacy. Out of 90 deputies present at the session, 85 voted for Topi, while Neritan Ceka, head of the opposition Democratic Alliance party, won five votes. Topi, 50, a former agriculture minister, now succeeds President Alfred Moisiu for a five-year mandate.

People of Albania

Scholars believe the Albanian people are descended from a non-Slavic, non-Turkic group of tribes known as Illyrians, who arrived in the Balkans around 2000 BC. After falling under Roman authority in 165 BC, Albania was controlled nearly continuously by a succession of foreign powers until the mid-20th century, with only brief periods of self-rule.

Following the split of the Roman Empire in 395, the Byzantine Empire established control over present-day Albania. In the 11th century, Byzantine Emperor Alexius I Comnenus made the first recorded reference to a distinct area of land known as Albania and to its people.

Population (2009 est.): 3,639,453.

Population growth rate (2009 est.): 0.56%.

Ethnic groups (2004 est., Government of Albania): Albanian 98.6%, Greeks 1.17%, others 0.23% (Vlachs, Roma, Serbs, Montenegrins, Macedonians, Balkan Egyptians, and Bulgarians).

Religions: Muslim (Sunni and Bektashi) 70%, Albanian Orthodox 20%, and Roman Catholic 10%.

Official language: Albanian.

Health (2007 est.): Life expectancy--males 74.95 years; females 80.53 years. Infant mortality rate--20.02 deaths per 1,000 live births.