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Albania country guide

27 August 2006
by eub2 -- last modified 21 August 2012

Albania is a potential candidate country of the European Union.


Political profile

Official name Republic of Albania
Capital Tirana
Population 3.6 million
Area 28,748 km²
Density 109 inhabitants per km²
Distribution 44% urban population, 56% in rural areas
Neighbours Greece (282 km border), The former Yugoslav Republic of Macedonia (151 km border), Montenegro (172 km border), Serbia (115 km border).
Population profile Albanian 95%, Greek 3%, other 2% (Vlach, Roma, Serb, Macedonian, Bulgarian, etc) (1989 est.)
note: in 1989, other estimates of the Greek population ranged from 1% (official Albanian statistics) to 12% (Greek organization) (The World Fact Book, CIA country reports, Albania)
Languages Albanian, Greek, Vlach, Romani, Slavic languages
Religion Muslim 70%, Albanian Orthodox 20%, Roman Catholic 10%
note: percentages are estimates; no current statistics are available on religious affiliation; all mosques and churches were closed in 1967 and religious observance prohibited; in November 1990, Albania began allowing private religious practice. (The World Fact Book, CIA country reports, Albania)
Life expectancy Average: 77.06 years, 74.37 years (male), 80.02 years (female) (2004 est.)

Economic profile

GDP per capita

EUR 2,309 in 2006  (IMF, World economic outlook)

Economic growth

5.1% in 2006

Inflation rate

2.4% in 2006

Unemployment rate

13.8% in 2006


1 lek = 100 qindars
EUR 1 = 123,365 (2007 est.)

Current account balance in % of GDP in 2006 - 7.1 %

General government balance in % of GDP in 2006

- 3.2

General governmental debt in % of GDP in 2006


External debt

16.8%of GDP in 2006, (IMF : Third Review Under the Poverty Reduction and Growth Facility Arrangement, Review Under Extended Arrangement, and Financing Assurances Review, June 2007)

Foreign direct investments 3.6 % of GDP in 2006
Trade with EU (25) in 2006 Export to the EU: EUR 449 Mio Imports from the EU: EUR 1,578Mio

Economic structure and main structural issues

 In 2006, official GDP reached around EUR 6.563 billion. The services sector is one of the most dynamic and accounts for a large part of the economy, 57.9% of GDP, while agriculture accounts for 23.3% and industry for 18.8%. The growth of the services and industrial sectors has increased while growth has remained modest in the agricultural sector. The income per capita in Albania, measured in purchasing power, amounted to around 18% of the EU-27 average.

In 2006, Albania's GDP growth reached an annual average of 5.1 % due to broadly successful stabilisation programmes, a sound structural environment and domestic demand fed by booming credit and significant remittance inflows. To maintain this performance, Albania will need to enhance structural reforms and to address the problems of the energy sector.

Substantial reforms have been made to promote the private sector involvement in key fields and privatisation has made some progress. In July 2007, the national telecommunication company Albtelecom was privatized.  This was the largest privatisation since 2004. However, the size of the public sector remains significant.

The Albanian banking sector, dominated by commercial, privately-owned banks, remains generally well capitalized, liquid and profitable. In June 2007, a new banking law entered into effect setting higher standards as regards banking activity.

Albania has been a member of the World Trade Organisation since 2000. Its WTO schedule provides for gradual trade liberalisation until 2007. Albania has concluded and is implementing Free Trade Agreements with all SAP neighbouring countries and territories. Albania is also part of the Central European Free Trade Agreement (CEFTA) that took effect in July 2007, and has ratified a Free Trade Agreement with Turkey. Through the trade concessions of the Stabilisation and Association Agreement and the EU autonomous trade measures, Albania benefits from duty and quota free access to EU markets for most of its products.

Macroeconomic situation

Average annual inflation rate reached 2.4% in 2006. One of the main challenges for the Bank of Albania is to maintain low inflation in the face of rapid credit growth and the relatively high growth rates in money supply. InJune 2007, the Bank raised its main policy rate to 5.75%.Albania has a managed floating exchange rate regime.

Foreign Investments reached an estimated 3.6% of GDP in 2006 and increased by 16% compared to 2005.Main investors in the region are European countries, especially Italy and Greece. They invest mainly in the textile manufacturing industry, in particular in clothes and footwear.

Albanian trade deficit increased to 23.1 % of GDP in 2006. Exports of goods to the EU accounted for around 88% of the total exports of goods in 2006. Italy was the main trade partner, accounting for more than 4/5 of total Albania's exports of goods to the EU, followed by Greece (11%) and Germany (4%).Imports from the EU accounted for approximately 63% of total imported goods. Albania has expanded its trade exchanges with non-EU neighbour countries, in particular Turkey. Exchanges were mainly concentrated in the footwear and textile industry, which put together accounted for around 55% of Albania's total exports of goods.

In 2006, the current account deficit (excluding official transfers) deepened to estimated 7.6% of GDP. The Albanian government's external debt situation is estimated at around 17% of GDP at the end of 2006, accounting for around 31% of total public debt.

Relations with International Financial Institutions

The World Bank's Country Assistance Strategy (2006-2009), focuses on two main areas: support to private sector development in order to promote economic growth and strengthening of public service delivery. Since the beginning of the World Bank’s programme in Albania, 59 projects for a total amount of $855 million have been approved.

In July 2007, the International Monetary Fundcompletedthe third review of Albania's economic performance and financing assurances under the three-year Poverty Reduction and Growth Facility (PRGF) arrangement and the Extended Fund Facility (EFF) arrangement. All the quantitative targets and structural conditions were met.

The strategy of the European Bank for Reconstruction and Development (EBRD) for Albania is to focus its action on private sector development, support to SMEs, and infrastructure development, particularly the energy sector and the transport and telecommunications networks.

More details on the economic situation can be found in the Candidate and Pre-Accession Countries' Economies Quarterly (CCEQ) published by the European Commission.

Information extracted from: The Western Balkans in Transition, Enlargement Papers No.30, European Economy, European Commission, December 2006 and the 2006 Economic and Fiscal Programmes of potential countries, European Economy, European Commission, Occasional Papers 32, July 2007.

Source: European Commission

EU  relations with Albania

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