The International Monetary Fund published today the Albania Report, which highlights that during 2024 the Albanian economy is one of the fastest growing economies in Europe based on tourism and prudent macroeconomic policies, but it is facing difficulties such as rapid population aging, emigration, low productivity and governance shortcomings.

The report, which followed an IMF mission held in November, highlights that despite strong performance, Albania's Gross Domestic Product (GDP) per capita remains at about a quarter of the level of EU member states.

"Despite the optimistic macroeconomic outlook, significant structural challenges remain. GDP per capita stands at about a quarter of US and EU levels, while rapid aging and emigration are occurring. Broad reforms are needed to improve governance, public finance management, and increase human capital and productivity to foster more sustainable long-term growth," the IMF report on Albania states, VOA reports.

It says that output is now much higher than before the COVID-19 pandemic thanks to a boom in tourism. According to the IMF, prudent fiscal policies helped significantly reduce public debt, while the decline in inflation was facilitated by monetary policies, falling commodity prices in international markets, and the appreciation of the lek. The trade deficit has also shrunk significantly.

The IMF estimates that growth prospects are expected to remain strong. Real GDP growth was 3.9 percent in 2023, but in 2024-29 it is projected to be around 3.5 percent, driven by domestic consumption, tourism and construction, the report says, while at the end of 2024 inflation is expected to be around 2 percent, one percentage point below the Bank of Albania's target.

The report highlights that the authorities are expected to exceed their budget target for 2024; from 0.3 percent of GDP, the surplus is projected to go to 0.5 percent of GDP, while the 2025 budget aims for a zero primary balance, while revenues are assessed to be on track, thanks to the favorable conjuncture and delays in the execution of capital expenditures.

The IMF estimates that public debt is estimated to be sustainable in the medium term, and from a forecast of approximately 56 percent at the end of 2024, it is expected to fall to around 50 percent in 2029.

The report assesses that systemic weaknesses are present in the financial system, while the banking sector remains liquid and well-capitalized.

The IMF lists as sources of risk to the economy exposures to large borrowers and banks, the rapid expansion of bank lending to the real estate sector, which has marked a continuous increase in prices and accounts for two-thirds of unsecured foreign currency loans.