Albanian economy expanded 4.84% in 2022, World Bank says

Economic growth in all 6 economies of the WesternBalkans has surpassed pre-pandemic levels despite fallout from Russia’s invasion of Ukraine, higher prices, weather extremes, and other challenges, according to the World Bank's regular economic report.

The report states that by year-end, employment in Western Balkans contracted by over 1 percent, equivalent to 72,000 fewer jobs. Albania and Montenegro are the only countries where employment levels continued to grow.

According to the report, international tourism receipts accounted for up to more than 50 percent of total exports in Albania and the sector of tourism has fully recovered and surpassed the 2019 level.

"During 2022, the economy continued to rebound strongly, despite rising food and energy prices. Albania's economy expanded by an average 4.84 percent in 2022 with growth being broadbased. Private consumption drove growth expanding by 7.2% in real terms, despite increasing energy and food prices," the report says.

Following Russia’s invasion of Ukraine, inflationary pressures intensified. Average inflation for 2022 is estimated at 6.7 percent, driven by food and transport prices. The report also states that such increases are adversely impacting the poorest citizens, given the higher weights these items have in their consumption basket. Nonetheless, inflation in Albania remains lower than in its peers, for several reasons.

The World Bank's report says that Albania’s current account deficit declined to 6 percent of GDP, despite increasing import prices, mostly thanks to the exceptional growth in tourism exports.

Strong revenue performance in 2021 and 2022 helped mitigate the fiscal impact of the Government of Albania’s response to shocks and reduce the fiscal deficits.

Inflation is expected to gradually start receding in 2023 and to return to the BoA’s target of 3 percent by mid-2024.

Growth is expected to remain subdued for 2023, in the context of tighter global financial conditions, an expected economic slowdown in Europe, and the withdrawal of policy support related to post-earthquake reconstruction.

Regarding the external account, services exports, including tourism and fastexpanding business-process operations, should remain strong.

Unlocking further growth is conditional on the swift implementation of the government’s program of reforms, the report states.