Thewesternbalkans
According to some Albanian media, as well as the press centre of the European Bank for Reconstruction and Development (EBRD), on 29-th of September the Bank has kept its growth forecast for Albania unchanged at 3.5% for both 2025 and 2026. The decision signals confidence in the country’s macroeconomic stability despite internal and external challenges.
According to the EBRD, a stable 3.5% growth outlook reflects confidence and supports Albania’s long-term fiscal trajectory. It also suggests the economy is well-positioned to navigate risks such as slowing demand in the Eurozone and lower remittances.
Albania’s economy grew by 3.4% in the first quarter of 2025, driven largely by services and construction, though agriculture and industry saw slight contractions. Inflation stayed low, with annual price growth at 2.3% in August. In response, the Bank of Albania cut its base interest rate to 2.5% in July — the third cut since summer 2024.
In its statement the EBRD highlighted this stable outlook:
“The European Bank for Reconstruction and Development has kept its forecast for Albania’s economic growth unchanged at 3.5% for 2025 and 2026. This reflects expectations of a steady economic trajectory despite pressures from external and domestic factors.”
The report highlights key risks, including potential demand slowdown in the Eurozone, reduced remittance flows, and climate factors like droughts that could affect agriculture and electricity generation.
On the upside, structural reforms and steady progress in EU accession talks are expected to bolster growth prospects.
The government aims to keep its debt on a downward trajectory, reducing public debt from 54.2% of GDP in 2024 to 45% by 2029.
Lower borrowing costs are expected as the share of short-term debt falls and reliance on domestic financing grows.
Comments: Economic development of Albania is the main factor for the acceleration of negotiations with the European Commission for full membership of the Balkan country in the European Union. The European Commission acknowledges that “the strong growth momentum is supported by a boom in the tourism sector, increased investment and higher wages.”
The EBRD report does not provide an estimate of the shadow economy, which is impressive, especially in the agricultural sector, and accounts for a large part of the country’s GDP. Despite macroeconomic stability, the country suffers from a skills shortage, and around 40 percent of Albania’s workforce works abroad.
In just a few years, Albania has ceased to be the poorest country in Europe. Called by many the “European Caribbean,” the country is experiencing a real tourism boom that is catapulting its economy. Albanians have seen tourism as an opportunity to escape the poverty trap. This has been helped by the stratification of societies in the countries of Central Europe, the creation of a niche of tourists with relatively low incomes, combined with the ambitious promotion of a previously unknown country by the Albanian government, which has stimulated a significant increase in the number of tourists in the last two to three years. However, the Albanian government has only recently begun drafting a strategy for the development of tourism in the country.
