2017 Index of Economic Freedom

Albania

overall score64.4
world rank65
Rule of Law

Property Rights54.0

Government Integrity39.7

Judicial Effectiveness28.5

Government Size

Government Spending72.5

Tax Burden86.9

Fiscal Health51.5

Regulatory Efficiency

Business Freedom79.3

Labor Freedom50.7

Monetary Freedom81.4

Open Markets

Trade Freedom87.7

Investment Freedom70.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 2.8 million
  • GDP (PPP):
    • $32.7 billion
    • 2.6% growth
    • 1.9% 5-year compound annual growth
    • $11,301 per capita
  • Unemployment:
    • 17.3%
  • Inflation (CPI):
    • 1.9%
  • FDI Inflow:
    • $1.0 billion
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Albania’s transition to a more open and flexible economic system has been facilitated by substantial restructuring over the past decade. The country has made considerable progress in income growth and poverty reduction. A competitive trade regime supported by a relatively efficient regulatory framework has encouraged the development of a growing entrepreneurial sector.

Albania continues on a path of gradual economic recovery, confronting challenging external conditions, but more reform is needed to ensure the growth of economic freedom and encourage vibrant economic development. The judicial system remains inefficient and vulnerable to political interference, and corruption is still perceived as widespread. Expansionary government spending has led to budget deficits and growing public debt in recent years, but the deficits have been narrowing.

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Background

Socialist Edi Rama was elected prime minister in June 2013, defeating eight-year conservative incumbent Sali Berisha. As promised, Rama secured European Union candidacy status in June 2014. Albania achieved full membership in NATO in April 2009 and continues to make a small contribution to the NATO-led mission in Afghanistan. A Strategic Partnership agreement with the U.S. is intended to increase cooperation, including improvements in the rule of law. The economy is dominated by agriculture, which employs about half of the workforce, and services, including tourism.

Rule of LawView Methodology

Property Rights 54.0 Create a Graph using this measurement

Government Integrity 39.7 Create a Graph using this measurement

Judicial Effectiveness 28.5 Create a Graph using this measurement

Development of property legislation has been piecemeal and uncoordinated. Real estate registration procedures are cumbersome. The judiciary, although constitutionally independent, is subject to political pressure and intimidation and has limited resources. A 2015 law bars convicted criminals from holding public office, but public administration continues to be plagued by inefficiency, incompetence, and widespread corruption.

Government SizeView Methodology

The top individual income tax rate is 23 percent, and the top corporate tax rate is 15 percent. Other taxes include a value-added tax and an inheritance tax. The overall tax burden equals 23.6 percent of total domestic income. Government spending has amounted to 30.3 percent of total output (GDP) over the past three years, and budget deficits have averaged 4.9 percent of GDP. Public debt is equivalent to 71.9 percent of GDP.

Regulatory EfficiencyView Methodology

Business start-up procedures have become less costly, and there is no longer a minimum capital requirement for setting up a company. Labor demand in the formal economy, which has a high level of self-employment, is significantly influenced by the public sector. The government is on course to phase out many subsidies and price controls for electricity, water, agricultural products, and railroad transportation.

Open MarketsView Methodology

Trade is important to Albania’s economy; the value of exports and imports taken together equals 71 percent of GDP. The average applied tariff rate is 1.1 percent, and bureaucratic barriers deter international trade and investment. Most banks are foreign-owned. The banking system has benefited from increased competition and remains stable, but the number of nonperforming loans hinders credit growth.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.50.5
2Estonia79.11.9
3Ireland76.7-0.6
4United Kingdom76.40.0
5Georgia763.4
6Luxembourg75.92.0
7The Netherlands75.81.2
8Lithuania75.80.6
9Denmark75.1-0.2
10Sweden74.92.9
11Latvia74.84.4
12Iceland74.41.1
13Finland741.4
14Norway743.2
15Germany73.8-0.6
16Czech Republic73.30.1
17Austria72.30.6
18Macedonia70.73.2
19Armenia70.33.3
20Romania69.74.1
21Poland68.3-1.0
22Kosovo67.96.5
23Bulgaria67.92.0
24Cyprus67.9-0.8
25Belgium67.8-0.6
26Malta67.71.0
27Hungary 65.8-0.2
28Slovakia65.7-0.9
29Turkey65.23.1
30Albania64.4-1.5
31Spain63.6-4.9
32France63.31.0
33Portugal62.6-2.5
34Italy62.51.3
35Montenegro62-2.9
36Bosnia and Herzegovina60.21.6
37Croatia59.40.3
38Slovenia59.2-1.4
39Serbia 58.9-3.2
40Belarus58.69.8
41Moldova580.6
42Russia57.16.5
43Greece551.8
44Ukraine48.11.3
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