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Albania Economy
 
 
 

General

Albania's economy is poor-performing by Western European standards, but is making the difficult transition to a more open-market economy from its communist past.

The collapse of communism in Albania came later and was more chaotic than in other Eastern European countries and was marked by a mass movement of refugees to Italy and Greece in 1991 and 1992. Attempts at reform began in earnest in early 1992 after real GDP fell by more than 50% from its peak in 1989. Albania currently suffers from high organised crime and corruption rates. Reforms are taking place to fix that.

The democratically elected government that assumed office in April 1992 launched an ambitious economic reform program to halt economic deterioration and put the country on the path toward a market economy. Key elements included price and exchange system liberalisation, fiscal consolidation, monetary restraint, and a firm income policy. These were complemented by a comprehensive package of structural reforms including privatisation, enterprise, and financial sector reform, and creation of the legal framework for a market economy and private sector activity. Most agriculture, state housing and small industry were privatised. This trend continued with the privatisation of transport, services, and small and medium-sized enterprises. In 1995, the government began privatising large state enterprises. After reaching a low point in the early 1990s, the economy slowly expanded again, reaching its 1989 level by the end of the decade.

The economy of Albania continues to be bolstered by remittances of some 20% of the labour force that works abroad, mostly in Greece and Italy. These remittances supplement GDP and help offset the large foreign trade deficit.

International aid has helped defray the high costs of receiving and returning refugees from the Kosovo conflict. Large-scale investment from outside is still hampered by poor infrastructure; lack of a fully functional banking system; untested or incompletely developed investment, tax, and contract laws; and an enduring mentality that discourages initiative.

In early 2008, vast and untouched deposits of oil and gas were discovered in northern Albania. The deposits total 2.987 billion barrels of oil and 3.014 trillion cubic metres of natural gas. The announcement was made by the corporation Gustavson Associates LLC, engaged by Manas Petroleum Corporation, which has a contract with the Government of Albania to make explore the northern parts of the country for oil and gas deposits.

Overview

Economy - overview
Lagging behind its Balkan neighbours, Albania is making the difficult transition to a more modern open-market economy. Macroeconomic growth has averaged around 5% over the last five years and inflation is low and stable. The government has taken measures to curb violent crime, and recently adopted a fiscal reform package aimed at reducing the large gray economy and attracting foreign investment. The economy is bolstered by annual remittances from abroad representing about 15% of GDP, mostly from Albanians residing in Greece and Italy; this helps offset the towering trade deficit. The agricultural sector, which accounts for over half of employment but only about one-fifth of GDP, is limited primarily to small family operations and subsistence farming because of lack of modern equipment, unclear property rights, and the prevalence of small, inefficient plots of land. Energy shortages because of a reliance on hydropower, and antiquated and inadequate infrastructure contribute to Albania's poor business environment and lack of success in attracting new foreign investment. The completion of a new thermal power plant near Vlore has helped diversify generation capacity, and plans to improve transmission lines between Albania and Montenegro and Kosovo would help relieve the energy shortages. Also, with help from EU funds, the government is taking steps to improve the poor national road and rail network, a long-standing barrier to sustained economic growth.


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