2013 Index of Economic Freedom

Albania

overall score65.2
world rank58
Rule of Law

Property Rights30.0

Freedom From Corruption31.0

Limited Government

Government Spending75.1

Fiscal Freedom92.6

Regulatory Efficiency

Business Freedom81.0

Labor Freedom49.0

Monetary Freedom78.4

Open Markets

Trade Freedom79.8

Investment Freedom65.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 3.2 million
  • GDP (PPP):
    • $24.9 billion
    • 2.0% growth
    • 4.4% 5-year compound annual growth
    • $7,741 per capita
  • Unemployment:
    • 13.5%
  • Inflation (CPI):
    • 3.4%
  • FDI Inflow:
    • $1.0 billion
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Albania’s economic freedom score is 65.2, making its economy the 58th freest in the 2013 Index. Its overall score has increased by 0.1 point, with declines in property rights and labor freedom offset by improvements in business freedom and the management of public finance. Albania is ranked 27th among the 43 countries in the Europe region, and its overall score is above the world average.

Albania’s economy has benefitted substantially from a decade of increased openness and flexibility and weathered the immediate impact of the global economic crisis relatively well. Over the past two years, however, economic dynamism has slowed. Expansionary public spending that the government hoped would mitigate some of the pain of necessary adjustments has resulted in budget deficits and rising public debt, now near 60 percent of GDP.

Although the state continues to control key enterprises, particularly in the energy sector, the economy is mostly in private hands. Beneficial structural reforms have included bank privatization, implementation of competitive flat tax rates, and modernization of the regulatory environment. Deeper institutional reforms to reduce labor market regulations and increase the efficiency of the judiciary, which remains subject to political interference, are critical to further success. Corruption continues to undermine the prospects for long-term economic development.

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Background

Albania remains one of Europe’s poorest countries despite economic and political reforms since the end of Communist rule in 1992. Sali Berisha has been prime minister since 2005. His government, a coalition of the center-right Democratic Party and the Socialist Movement for Integration, is known for its strong focus on Euro-Atlantic integration. Albania signed a Stabilization and Association Agreement with the European Union in June 2006 and submitted a full application for membership in April 2009. It achieved full membership in NATO in April 2009 and continues to contribute troops to the NATO-led mission in Afghanistan. Transportation and energy infrastructure are poor by European standards, and the economy is dominated by agriculture and services, including tourism.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 31.0 Create a Graph using this measurement

Albania still lacks a clear property rights system, particularly for land tenure. Security of land rights remains a problem in coastal areas where there is potential for tourism development. Significant reform of the legal system is ongoing, but the courts are subject to political pressure and corruption. Protection of intellectual property rights is weak. Albania is a major transit country for human trafficking and illegal arms and narcotics.

Limited GovernmentView Methodology

Personal and corporate tax rates are a flat 10 percent. Other taxes include a value-added tax (VAT) and an inheritance tax. The overall tax burden equals 23.3 percent of total domestic income. Government expenditures stand at 28.8 percent of GDP, and public debt, which has increased since 2007, is around 60 percent of GDP. The 2012 budget included increases in government wages and pensions, causing some concern over rising debt levels.

Regulatory EfficiencyView Methodology

The entrepreneurial regulatory framework has become fairly streamlined, and starting a business takes less than the world averages of seven procedures and 30 days. Minimum capital requirements are modest. Despite some reform, labor market rules remain relatively rigid. With international commodity prices stable, inflationary pressures have eased and allowed the central bank to lower interest rates to stimulate domestic demand.

Open MarketsView Methodology

The trade-weighted average tariff rate is 5.1 percent. There are few formal non-tariff barriers, but inadequate infrastructure and administrative bureaucracy add to the cost of trade. Foreign and domestic firms are generally treated equally under the law, but there are restrictions on foreign ownership of land. Excessive bureaucracy discourages dynamic investment. Banking consists mainly of subsidiaries of foreign banks and remains relatively stable.

Country's Score Over Time

Bar Graph of Albania Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Albania to other economic country groups

Regional Ranking

rank country overall change
1Switzerland81-0.1
2Denmark76.1-0.1
3Ireland75.7-1.2
4Estonia75.32.1
5United Kingdom74.80.7
6Luxembourg74.2-0.3
7Finland741.7
8The Netherlands73.50.2
9Sweden72.91.2
10Germany72.81.8
11Georgia72.22.8
12Lithuania72.10.6
13Iceland72.11.2
14Austria71.81.5
15Czech Republic70.91.0
16Norway70.51.7
17Armenia69.40.6
18Belgium69.20.2
19Cyprus69-2.8
20Slovakia68.71.7
21Macedonia68.2-0.3
22Spain68-1.1
23Malta67.50.5
24Hungary 67.30.2
25Latvia66.51.3
26Poland661.8
27Albania65.20.1
28Romania65.10.7
29Bulgaria650.3
30France64.10.9
31Portugal63.10.1
32Turkey62.90.4
33Montenegro62.60.1
34Slovenia61.7-1.2
35Croatia61.30.4
36Italy60.61.8
37Serbia 58.60.6
38Bosnia and Herzegovina57.30.0
39Moldova55.51.1
40Greece55.40.0
41Russia51.10.6
42Belarus48-1.0
43Ukraine46.30.2
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