2019 Index of Economic Freedom

Albania

overall score66.5
world rank52
Rule of Law

Property Rights54.8

Government Integrity40.4

Judicial Effectiveness30.6

Government Size

Government Spending73.9

Tax Burden86.3

Fiscal Health80.6

Regulatory Efficiency

Business Freedom69.3

Labor Freedom52.7

Monetary Freedom81.5

Open Markets

Trade Freedom87.8

Investment Freedom70.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 2.9 million
  • GDP (PPP):
    • $36.0 billion
    • 3.9% growth
    • 2.5% 5-year compound annual growth
    • $12,507 per capita
  • Unemployment:
    • 13.9%
  • Inflation (CPI):
    • 2.0%
  • FDI Inflow:
    • $1.1 billion

Albania’s economic freedom score is 66.5, making its economy the 52nd freest in the 2019 Index. Its overall score has increased by 2.0 points, led by dramatic improvement for the second consecutive year in fiscal health and higher scores for judicial effectiveness, labor freedom, and government spending. Albania is ranked 27th among 44 countries in the Europe region, and its overall score is below the regional average but above the world average.

To promote its EU candidacy, Albania has been transitioning to a more open and flexible economic system by implementing substantial restructuring. Progress in income growth and poverty reduction has been considerable. A competitive trade regime supported by a relatively efficient regulatory framework has encouraged development of the growing entrepreneurial sector. To sustain this progress, the government plans additional reforms to improve the rule of law, encourage the growth of economic freedom, and ensure continued vibrant economic development.

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Background

The Balkan nation of Albania transitioned from Communist rule to multiparty democracy in 1991. The political situation stabilized after state-sanctioned pyramid schemes collapsed in 1997. Edi Rama became prime minister in 2013, and his Socialist Party won a parliamentary majority in 2017. Albania’s accession to the European Union 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 spur substantial emigration.

Rule of LawView Methodology

Property Rights 54.8 Create a Graph using this measurement

Government Integrity 40.4 Create a Graph using this measurement

Judicial Effectiveness 30.6 Create a Graph using this measurement

Property legislation is weak. Real estate registration procedures are cumbersome. The independent judiciary is subject to political pressure, intimidation, and limited resources, but a 2016 rewrite of one-third of the constitution involved the most significant judicial reforms since the end of Communism. Convicted criminals cannot hold public office, but public administration remains 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 value-added and inheritance taxes. The overall tax burden equals 24.9 percent of total domestic income. Over the past three years, government spending has amounted to 29.5 percent of the country’s output (GDP), and budget deficits have averaged 2.4 percent of GDP. Public debt is equivalent to 71.2 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 continues to phase out subsidies and price controls for electricity, water, and transportation but still subsidizes agriculture heavily.

Open MarketsView Methodology

The combined value of exports and imports is equal to 78.1 percent of GDP. The average applied tariff rate is 1.1 percent. As of June 30, 2018, according to the WTO, Albania had 196 nontariff measures in force. Bureaucratic barriers deter 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
1Switzerland81.90.2
2Ireland80.50.1
3United Kingdom78.90.9
4Iceland77.10.1
5Netherlands76.80.6
6Denmark76.70.1
7Estonia76.6-2.2
8Georgia75.9-0.3
9Luxembourg75.9-0.5
10Sweden75.2-1.1
11Finland74.90.8
12Lithuania74.2-1.1
13Czech Republic73.7-0.5
14Germany73.5-0.7
15Norway73-1.3
16Austria720.2
17Macedonia71.1-0.2
18Latvia70.4-3.2
19Bulgaria690.7
20Malta68.60.1
21Romania68.6-0.8
22Cyprus68.10.3
23Poland67.8-0.7
24Armenia67.7-1.0
25Belgium67.3-0.2
26Kosovo670.4
27Albania66.52.0
28Spain65.70.6
29Slovenia65.50.7
30Portugal65.31.9
31Hungary 65-1.7
32Slovakia65-0.3
33Turkey64.6-0.8
34Serbia 63.91.4
35France63.8-0.1
36Italy62.2-0.3
37Bosnia and Herzegovina61.90.5
38Croatia61.40.4
39Montenegro60.5-3.8
40Moldova59.10.7
41Russia58.90.7
42Belarus57.9-0.2
43Greece57.70.4
44Ukraine52.30.4
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