2020 Index of Economic Freedom

Albania

OVERALL SCORE66.9
WORLD RANK57
Rule of Law

Property Rights57.1

Judicial Effectiveness33.0

Government Integrity38.8

Government Size

Tax Burden85.9

Government Spending74.6

Fiscal Health86.3

Regulatory Efficiency

Business Freedom65.7

Labor Freedom52.1

Monetary Freedom81.2

Open Markets

Trade Freedom88.4

Investment Freedom70.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 2.9 million
  • GDP (PPP):
    • $38.4 billion
    • 4.2% growth
    • 3.1% 5-year compound annual growth
    • $13,345 per capita
  • Unemployment:
    • 13.9%
  • Inflation (CPI):
    • 2.0%
  • FDI Inflow:
    • $1.3 billion

Albania’s economic freedom score is 66.9, making its economy the 57th freest in the 2020 Index. Its overall score increased slightly by 0.4 point, led by an improvement in fiscal health. However, the country dropped five positions in the 2020 Index rankings, reflecting relatively better performances by other countries. Albania is ranked 30th among 45 countries in the Europe region, and its overall score is below the regional average and above the world average.

Economic freedom has increased steadily in Albania, and its 2020 score matches its highest, which was recorded in 2014. The economy is considered moderately free and continues to register a healthy rate of GDP growth.

The government has made progress in controlling the budget deficit, stabilizing public debt, and creating a more business-friendly environment. To improve its chances for eventual accession to the EU, Albania must record significant increases in its scores for property rights, judicial effectiveness, and government integrity.

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Background

The Balkan nation of Albania transitioned from Communist rule to multiparty democracy in 1991. Edi Rama became prime minister in 2013, and his Socialist Party won a parliamentary majority in 2017. Opposition accusations of corruption and fraud led to calls for snap elections in 2019. Albania’s accession to the EU has stalled in the absence of additional reforms to fight corruption and improve the rule of law. Agriculture dominates the economy and employs about half of the workforce, but services and tourism are increasingly important. Albania remains one of Europe’s poorest countries, with sluggish economic growth hindered by a large informal economy and weak energy and transportation infrastructure. High unemployment and a lack of opportunity encourage substantial emigration.

Rule of LawView Methodology

Property Rights 57.1 Create a Graph using this measurement

Judicial Effectiveness 33.0 Create a Graph using this measurement

Government Integrity 38.8 Create a Graph using this measurement

Protection of property rights remains weak. Real estate registration procedures are cumbersome and subject to demands for bribes. The judiciary is independent but subject to political pressure, intimidation, and limited resources, although a 2016 rewrite of one-third of the constitution accomplished the most significant judicial reforms since the end of Communism. Public administration continues to be plagued by inefficiency and 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 value-added and inheritance taxes. The overall tax burden equals 25.7 percent of total domestic income. Government spending has amounted to 29.1 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 1.6 percent of GDP. Public debt is equivalent to 68.6 percent of GDP.

Regulatory EfficiencyView Methodology

Enforcement of contracts has become easier but remains problematic. Similarly, unemployment has decreased in recent years but remains high. Outward migration of skilled labor remains a concern. The European Commission reported in 2019 that public subsidies remain low overall, but increasing reliance on public–private partnerships raises the potential for state influence in certain markets.

Open MarketsView Methodology

The total value of exports and imports of goods and services equals 77.3 percent of GDP. The average applied tariff rate is 0.8 percent, and 196 nontariff measures are in force. Despite some progress in modernizing the investment regime, there are limits on foreign ownership. The financial system remains relatively stable. The banking sector is well provisioned, but the share of nonperforming loans has been rising.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Switzerland820.1
2Ireland80.90.4
3United Kingdom79.30.4
4Denmark78.31.6
5Estonia77.71.1
6Georgia77.11.2
7Iceland77.10.0
8Netherlands770.2
9Lithuania76.72.5
10Luxembourg75.8-0.1
11Finland75.70.8
12Sweden74.9-0.3
13Czech Republic74.81.1
14Germany73.50.0
15Norway73.40.4
16Austria73.31.3
17Latvia71.91.5
18Armenia70.62.9
19Bulgaria70.21.2
20Cyprus70.12.0
21Romania69.71.1
22North Macedonia69.5-1.6
23Malta69.50.9
24Azerbaijan69.33.9
25Poland69.11.3
26Belgium68.91.6
27Slovenia67.82.3
28Kosovo67.40.4
29Portugal671.7
30Albania66.90.4
31Spain66.91.2
32Slovakia66.81.8
33Hungary 66.41.4
34France662.2
35Serbia 662.1
36Turkey64.4-0.2
37Italy63.81.6
38Bosnia and Herzegovina62.60.7
39Croatia62.20.8
40Moldova622.9
41Belarus61.73.8
42Montenegro61.51.0
43Russia612.1
44Greece59.92.2
45Ukraine54.92.6
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