OUTLOOK 2021 Albania - Balkan Times

OUTLOOK 2021 Albania


Political outlook

Albania is facing a challenging year in terms of the EU integration process, the upcoming general elections in April and the fight against coronavirus (COVID-19).

The country is heading towards a regular general election on April 25, with the ruling Socialist Party and the opposition Democratic Party (DP) led by Lulzim Basha being the main rivals.

Obtaining a date to start EU accession talks will be Albania’s main foreign policy priority in 2021.

Macroeconomic outlook

The damaged economy is expected to contract by 7-8% in 2020, but is seen as recovering with growth of around 5.5% in 2021.

Further reconstruction after the November 2019 earthquake will continue in 2021 and should boost economic growth.

Budget and debt outlook

Albania’s budget gap in 2021 is projected at 6.5% of the country’s GDP, reflecting the expected relatively high level of public investment.

The draft budget envisages a reduction of about 2 percentage points (pp) of the public debt-to-GDP ratio, to bring it down to around 78.6% at the end of 2021.

Markets outlook

Only government securities are traded on Albania’s new stock exchange, the Albanian Securities Exchange (ALSE).

The newly formed power exchange operator, ALPEX, will operate the day-ahead market coupling between Albania and Kosovo when it commences operations in the near future.



The next elections on April 25 for 140 members of the parliament will be the first to be held under the EU-required electoral reforms adopted on June 5 by all political parties in Albania. The reforms were later contested by the opposition due to the unilateral changes made by the ruling party. In the previous election, the Socialist Party won 74 of the 140 seats.

Prime Minister Edi Rama will seek his third mandate after governing for two successive mandates since 2013. Basha is the candidate for prime minister for the united opposition, which also includes the Socialist Movement for Integration (LSI) led by Monika Kryemadhi, the wife of Albanian President Ilir Meta.

According to the latest poll, which was conducted in September 2020, the Socialist Party is expected to win the April elections with 53% of the vote, while the Democratic Party would receive 40%.

MPs from the centre-right opposition Democratic Party left the parliament in February 2019 and gave up their mandates as another way of fighting Rama’s government. Later the LSI followed suit. The opposition accuses Rama’s cabinet of crime, corruption and mafia-style ruling.

The opposition argue the latest electoral reforms are not inclusive and will not improve trust between the main players. The threshold for parties to enter the parliament has been now lowered to 1% instead of the previous 3%. The lists are partially open.

The reforms needed constitutional changes, which were approved by the parliament at the end of July 2020 to allow open lists in the next elections and a new formula for coalitions. The amendment of the constitution aroused significant public debate and was strongly opposed by the opposition.

The Council of the EU agreed to open accession talks with Albania, alongside North Macedonia, in March 2020, but in December the EU Council did not approve a date for the first intergovernmental conferences.

The reason was the Bulgaria’s veto on North Macedonia’s bid which in turn blocked the whole EU enlargement process. The veto did not refer to Albania, but some countries, particularly the Netherlands, assessed that Albania failed to implement all needed reforms and recommended the reform process continue before the start of the negotiation process.

The Dutch government underlined in November that Albania needs to meet all conditions set by the EU Council before the start of the EU accession talks, specifying filling the vacancies in the high court, prosecution of high-level crimes and the electoral law reform, especially the second, unilateral part of that reform.

Rama said that the Dutch government and media would be responsible for a failure by Albania to launch the first intergovernmental conference after unjustly portraying Albanians in a negative light.

Albania must now wait for a positive EU decision for the official start of the negotiation process, possibly in the first half of 2021.

Due to the all-encompassing judicial reforms in the country, which saw the resignations and dismissals of many judges, the Constitutional Court had only one member out of nine in December 2019. Now it has four, which still means it cannot hold plenary sittings, for which at least six judges are required.

Among the criteria, the EU Council expects the media law to be amended in line with the recommendations of the Venice Commission.

Albania, a Nato member since 2009, has been an EU candidate country since 2014.

In the region, Albania is part of the mini-Schengen initiative that it launched along with Serbia and North Macedonia in 2019.

Under the initiative, goods and capital between these countries will flow more quickly, while people will be able to cross borders with ID only. The activities of the initiative were delayed due to the coronavirus pandemic.



The Albanian government projects economic growth of 5.5% in 2021. The budget for 2021 is to support the economic recovery after the coronavirus crisis and devastating earthquake in 2019.

According to the International Monetary Fund (IMF), the Albanian economy is expected to recover gradually in 2021, achieving growth of 5.4%, following the expected 7.5% GDP contraction in 2020. A more severe pandemic would further dampen Albania’s economic outlook, through weaker tourism, remittances, external demand and FDI, as well as tighter financial conditions

The return to growth is expected when the shocks caused by the coronavirus pandemic subside while reconstruction spending related to November 2019 earthquake is expected to pick up.

Since the outbreak of the coronavirus pandemic Albania, a country of 2.8mn people, had registered almost 60,000 positive cases and over 1,190 deaths as of January 5. Rama travelled to the US in early December to meet COVID-19 vaccine producers and ensure vaccines arrive in Albania as soon as possible.

Average annual inflation is seen at 1.6% in 2021 following a 1.4% growth in 2020. Inflation is expected to remain subdued before converging to the 3% target over the medium term.

The current account deficit is expected to drop to 8.1% of GDP in 2021 after standing at 11.2% of GDP in 2020.

Gross international reserves are seen rising to €3.3bn in 2021 from €2.9bn in 2020.

According to the World Bank, Albania can achieve growth of 5% in 2021, following a projected 8.4% contraction in 2020. The 2020 contraction was be a result of business closures, scaled back operations and disruptions in supply chains that hurt manufacturing. Performance of the tourism season, which is a key growth driver, has been dismal, while consumption and investment decisions have been delayed.

According to the World Bank projection, net foreign investment in Albania is seen rising to 6.2% of GDP in 2021 from 5.9% of GDP in 2020.

Exports of goods and services is projected to jump 28% in 2021 from a 19% contraction in 2020, while imports are seen rising 12.4% in 2021 from a 19% decline in 2020.

Private consumption in Albania is seen rising 4.7% in 2021 after a projected 8% drop a year earlier.

Despite the COVID-19 impact, the banking sector will remain liquid and well capitalised, supported by the borrower relief and prudential measures taken by the central bank. However, the uncertain economic recovery and increasing number of distressed borrowers highlight potential spillover risks to the banking sector.



Albania’s budget gap in 2021 is projected at 6.5% of the country’s GDP, reflecting the projection of a relatively high level of public investment, of 7.2% of GDP. The ALL108.7bn (€876.6mn) 2021 state budget gap will be mainly financed with borrowing on the internal financial market.

Albania also has the potential to tap international markets; it issued a seven-year Eurobond worth €650mn, with a coupon rate of 3.65%, in June 2020.

The budget revenues for 2021 are set at ALL479bn, up 10.6% from the planned budget for 2020. Of this total, tax revenues are planned at ALL437bn. Budget expenditures are seen at ALL587.6bn, which is 34.9% of the GDP.

Public investments for 2021 are projected at 7.2% of GDP or ALL120.6bn. The budget is based on economic growth of 5.5% in 2021.

The draft budget envisages a reduction of about 2 pp of the ratio of public debt to GDP, to bring it down to around 78.6% at the end of 2021. The budget was described by the government as an appropriate response to the coronavirus pandemic and support for the reconstruction efforts after the 2019 earthquake.

The budget is focused on supporting the health system and also foresees a 40% wage increase for doctors in 2021.

The general government debt is projected to fall to 70.7% of GDP in 2021 from 75.6% of GDP in 2020. Domestic debt is seen declining to 40.5% of GDP in 2021 from 43% of GDP in 2020.

Albania’s public debt is projected to gradually decline over the medium term, in line with the authorities’ commitment to strengthening fiscal sustainability. The employment outlook is largely dependent on the recovery of the services sectors and the amounts invested in reconstruction.



Albania’s industry is expected to grow by 6.9% in 2021, after projected zero growth in 2020, according to the World Bank.

The agricultural sector is seen rising by 1.7% in 2021 from 1.2% in 2020. The service sector is expected to turn to a growth of 5.4% in 2021 from a 15.6% contraction in the previous year.

Recessions in EU countries, which are Albania’s main trading partners and FDI and remittances sources, supply chain disruptions, travel limitations and social distancing measures were taking a heavy toll on key economic sectors, including tourism and manufacturing.

The crisis increased poverty through higher unemployment. The normalisation of the global economy will have a significant impact on the shape of the recovery of the Albanian economy.

The slowdown in labour-intensive sectors increased unemployment to 11.9% in the second quarter of 2020, up from 11.5% a year earlier.

Rating agency Moody’s has warned over the relatively low degree of diversification, as well as weaknesses in the area of rule of law and control of corruption.

The Albanian authorities have introduced wage subsidies, increased social spending, enacted a temporary moratorium on loan instalments and offered credit guarantees to ease salary payments and working capital.

Still, many informal workers and entrepreneurs face severe economic stress. Despite these measures, poverty (the percentage of the population living on less than $5.5 per person per day in 2011 PPP) is expected to increase by around 5 pp.

According to the latest statistics office data, the average gross monthly wage in Albania totalled ALL54,149 in the second quarter of 2020.

In 2021, salaries for doctors, nurses and laboratory technicians for primary and secondary public health services will be raised by 40% and for teachers in the pre-university system by 15%.

The Albanian government will also increase the minimum wage to ALL30,000 from ALL26,000 starting from 2021.

One of the main infrastructure projects planned by Albanian government is the construction of the second airport in the country, which will be located in Vlora, a project expected to start in 2021.



Only government securities are being traded on Albania’s new stock exchange, the Albanian Securities Exchange (ALSE) so far.

In October 2020, the transmission system operators (TSOs) of Albania and Kosovo, OST and KOSTT, signed an agreement to set up a joint power exchange company that will operate the short-term electricity markets in both countries.

The power exchange operator, called ALPEX, will be headquartered in Tirana and will operate the day-ahead market coupling between Albania and Kosovo soon after commencing operations. ALPEX is expected to extend its services to the intraday market segment in the future.


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