Albania is a middle-income country that has made enormous strides in establishing a credible, multi-party democracy and market economy over the last two and a half decades. Following graduation from the International Development Association (IDA) to the International Bank for Reconstruction and Development (IBRD) in 2008, Albania has generally been able to maintain positive growth rates and financial stability, despite the ongoing economic crisis.

Before the global financial crisis, Albania was one of the fastest-growing economies in Europe, enjoying average annual real growth rates of 6%, accompanied by rapid reductions in poverty. However, after 2008 average growth halved and macroeconomic imbalances in the public and external sectors emerged. The pace of growth was also mirrored in poverty and unemployment: between 2002 and 2008, poverty in the country fell by half (to about 12.4%) but in 2012 it increased again to 14.3%. Unemployment increased from 12.5% in 2008 to 17.6 % in 2014, with a slight improvement of 17.3% in 2015, while youth unemployment reaching 32.1 % in the same period.

The recovery to growth rates above 3% in 2011 moderated in 2012 and 2013, reflecting the deteriorating situation in the Eurozone and the difficult situation in the energy sector. Fiscal consolidation that started in 2014, coupled with a number of important structural reforms, including in public financial management, energy, and pensions, created the conditions for rebounding business confidence and domestic demand.

Growth is estimated at around 2.6 percent in 2015 and 3.4 percent in 2016. Albania’s labor market has undergone some dramatic shifts over the last decade, contributing to productivity growth. Formal non-agricultural employment in the private sector more than doubled between 1999 and 2013, fueled largely by foreign investment. Emigration and urbanization brought a structural shift away from agriculture and toward industry and service, allowing the economy to begin producing a variety of services - ranging from banking to telecommunications and tourism.

Despite this shift, agriculture remains one of the largest and most important sectors in Albania. Agriculture is a main source of employment and income – especially in the country’s rural areas – and represents around 21% of GDP while accounting for about 43.3% of the work force. Albania’s agricultural sector continues to face a number of challenges, however, including small farm size and land fragmentation, poor infrastructure, market limitations, limited access to credit and grants, and inadequate rural institutions.

Looking toward the future, Albania is focused on supporting economic recovery and growth in a difficult external environment, broadening and sustaining the country’s social gains, and reducing vulnerability to climate change. Key challenges for Albania going forward include fiscal consolidation and strengthened public expenditure management, regulatory and institutional reform, reduction of infrastructure deficits, and improvement in the effectiveness of social protection systems and key health services.

The World Bank Group began work with Albania in 1991. It has supported a number of projects aimed at delivering an immediate alleviation of poverty and at providing sustainable tools and long-lasting development to foster further growth. In the two decades of engagement with Albania, the World Bank Group has provided more than $2.4 billion in assistance through commitments from the International Development Association (IDA), the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). The current portfolio consists of nine projects totaling $ 544 million IDA credits and IBRD loans.

A new five-year Country Partnership Framework (CPF) for Albania covering 2015–19 was endorsed by the World Bank Group Board of Executive Directors on May 21, 2015. The CPF proposes an indicative lending program of up to US$1.2 billion over a five-year period aimed at supporting Albania’s aspirations to achieve equitable growth and integration into the European Union. The three main focus areas of the CPF are:

  1. Restoring macro-economic balances,
  2. Creating conditions for accelerated private sector growth, and
  3. Strengthening public sector management and service delivery.

The CPF was preceded by a Systematic Country Diagnostics (SCD) that identified the key constraints and opportunities for Albania’s growth and also with regard to reducing poverty and boosting shared prosperity. The CPF deepens the World Bank Group engagement in the priority areas identified in the SCD and the Government’s draft National Strategy for Development Integration.

Albania has made great progress with support from the World Bank Group. Priority areas for this partnership include transportation, agriculture, energy, water, environment, health social and public sector management initiatives.

Some of Albania’s development results include:

Education: The Bank has supported three projects in the education sector. These projects have helped to build or reconstruct more than 300 schools in priority areas, in which 100,000 children have benefited from new schools. Major, wide-ranging education reforms were initiated in 2006. These reforms included curriculum reform, improved teacher training, a more equitable distribution of resources across regions, improvement of learning conditions, less-crowded classrooms, an increase in teachers ‘average salaries and the renewal of the content and administration of the Matura examination (the secondary school-leaving examination) to ensure objective results. Reforms continue to be implemented successfully. The Excellence and Equity Project, jointly financed by the Government, the World Bank, the European Investment Bank (EIB) and the Council of Europe Development Bank (CEDB), has helped to improve the quality of learning conditions for students and to increase enrollment in general secondary education, especially for the poor. All primary schools are using the new curriculum and textbooks. Over 2,000 basic and secondary-level schools have been equipped with computers and Internet access, decreasing the student-per-computer ratio in the general secondary schools from 61 to 16 students per computer. 250 chemistry labs and 250 biology labs were provided to basic education schools, and 100 chemistry labs and 100 biology labs were provided to general secondary education schools. Going forward, it will be important for Albania’s education reform efforts to focus on developing “21st-century skills” among its students and to do so in a way that is evidence-based and linked to labor market needs. Gaps exist in understanding the constraints that hinder a well-functioning labor market in Albania. A comprehensive multi-sectorial approach will be required to identify both supply and demand side constraints. The Bank will engage in an analytical program to identify the constraints to skills development and employment in Albania.

Health: The public sector contribution to health sector is relatively low and well below the SEE average. As a result of low public sector spending, out of-pocket expenditures at the point of service account for about 60% of sectoral funding. The poor population faces an economic barrier when it comes to accessing quality healthcare services. The government is committed to making improvements and is currently working to develop a heath-financing policy that will address these problems. The Bank has supported the healthcare sector in Albania through three projects (Health Service Rehabilitation Project, 1994, Health Recovery Project, 1998, Health System Modernization Project, 2008). By financing the construction, reconstruction, and equipping of 115 centers in the poorest areas of the country, the Bank funds have contributed to improving the quality of basic preventive and curative health services. With the assistance of the Bank and other donors, the government has established new hospital services in three major cities, and has completed the general master plan for the future of development of the single tertiary hospital in the capital. Support has been given to advance reforms in key policy areas such as decentralization, health insurance, and transparency in sector expenditures. The Health System Modernization Project assisted the government in improving physical and financial access to high quality primary health care services, as well as strengthening institutions. All regional hospitals as well as primary health care centers have been supported with main medical equipment. The Health Insurance Institute has been supplied with required IT equipment for the central and regional offices. A comprehensive range of reforms have been supported through the project. The Bank is currently supporting the health sector in Albania through Health System Improvement Project, which is focused on improving the efficiency and quality of health care. The project seeks to strengthen the management and governance of public hospital services, improve health financing arrangements, and establish health information systems.

Transportation: The World Bank concentrated significant financing and expertise on assisting Albania’s transport system by establishing a modern infrastructure network, supporting sector reform, and enhancing road asset management. Since the beginning of the Bank’s intervention in the sector, nine projects have been implemented improving connectivity and access to markets and services i.e.: education, healthcare administrative and banking services, and in connecting the major urban centers with the international market. Deteriorated and obsolete national and rural road networks were reconstructed, or upgraded and extended; and new roads were built through various projects that targeted national and rural networks. The National Road Project (1996) helped rehabilitate and construct of about 90 km national roads, in the East-West and Northern corridors connecting port of Durrës with neighboring countries such as Macedonia and Greece. In parallel, Durres Port Project (1998) improved the efficiency, safety and effective capacity of the Albania’s main port, by increasing its commercial orientation and rehabilitation of infrastructure. The Rural Roads Project (1995) improved around 975 km of rural roads, while The Road Maintenance Project (2007) contributed to the repair and maintenance of 500 km of roads. The Albania Transport Project (2007) supported improvement of access for hinterland population and construction of 26 kilometers of Durres - Morine Corridor. The Secondary and Local Roads Project (2008) completed about 110 km of secondary and local roads. Through this project, the Bank prepared an overall program for the entire secondary and local roads network, which in addition to its own financing ($20 million) leveraged about $350 million from other donors and International Financial Institutions (IFIs). The project provided an all-weather connection to many communities, improving access to essential services and economic markets for the resident population in the hinterland of the project roads. The ongoing Results-Based Road Maintenance and Safety Project aims at maintaining the condition and improve the safety of road networks, as well as strengthening sustainable and efficient road asset management and safety practices.

Urban Infrastructure: Albania is endowed with a variety of fascinating and distinctive places to visit, including a range of seacoast towns along the Adriatic, historic cities, and cultural heritage destinations featured on UNESCO’s World Heritage List. Years of under-financing of city and town infrastructure, however, has left a backlog of critical investment needs in water and sanitation systems, solid-waste management, inner-city road rehabilitation, and urban amenities. The World Bank’s Urban Infrastructure Portfolio is helping to address these deficiencies. The Land Administration and Management Project (LAMP) registered an estimated 357, 383 properties in urban areas, providing residents and businesses with secure property rights. The digitization of property records at some Immovable Property Registration Offices (IPRO), has reduced property registration time from 47 days to 6 days. The project developed the centralized IT system for registration of property rights and rolled it out in 10 offices with an on-line connection to notaries and completed digital registration for 10% of the properties in the country. The Disaster Risk Mitigation and Adaptation Project supported the provision with equipment of the National Emergency Command and Control Center and civil emergency response teams, establishment of 40 hydrological and meteorological monitoring stations and membership of Albania in the Catastrophic Risk Insurance Facility. With grant resources from the Global Facility for Disaster Reduction and Recovery (GFDRR) the government was assisted in the development of the medium- and long-term flood risk mitigation options for Drini-Buna river basin and addressing emergency repairs following the floods of 2010.

The ongoing Land Administration Data Improvement (LADI) Project, a small technical assistance project funded by EU and implemented by the Bank, is helping the government develop and pilot the process and procedures for digital data quality improvement for cadastre and land registration as well as develop the national plan for property registration data improvement and completion of the digital property register.

Water Supply and Sanitation: Albania is endowed with water resources of 8,600 m3 per capita, of which only 6% is withdrawn annually. This generous allowance helps the country to provide high coverage of water supply and sewerage services. But the relatively high coverage is negated by the poor quality of service. Despite Albania’s abundant water resources, water supply in urban areas is intermittent, and less than half of the rural population has access to piped water. Alongside other donors, the Bank has provided a steady stream of investments to help improve water and sanitation services, while contributing to institution building measures. The Bank is taking the lead in helping the government carry out policy reforms, focus on cost recovery, and to foster private sector and community involvement. The Municipal Water and Wastewater Project (2003) supported investments in improving water supply and sanitation services in four participating cities (Durres, Fier, Lezha and Saranda), and tried to assist water utilities to introduce a new incentive-based multi-city management contract approach, with the objective of increasing their financial viability. In parallel, The Integrated Water & Ecosystems Management Project (2004) built wastewater treatment plants in the coastal cities of Durrës, Lezha and Saranda. The ongoing Water Sector Investment Project (WSIP) is supporting priority investments to improve the quality of water utility performance and services, for both local residents and prospective tourists in the Durres region, as well as key institutional reform and activities orienting utility towards operational cost recovery, improvement of sector governance and regulation, etc.

Energy: The World Bank Group took a leading role in supporting power sector development in Albania through several projects that helped increase energy supply and security, while also reforming and restructuring the sector as to operate in a market-based environment. This support played a key role in improving the overall standard, reliability, and efficiency of the electric power supply, and enhancing the efficiency of electricity interchanges with neighboring countries. During the past two years, the Government initiated a vigorous outreach and enforcement program to reduce the theft of electricity and improve revenue collections. The situation improved drastically during the last two years. The distribution losses in 2015 declined to a level of 32 percent compared to 45 percent in 2013. The collection rate was around 98 percent in 2015 (including arrears).  The World Bank is financing a $150 million Power Reform and Recovery Project (2014) to support Albania’s power sector reforms, particularly efforts to improve the reliability of the electricity supply and the financial viability of the sector. Efficiency improvements in the distribution sector remain a key challenge, as well as diversifying the sources of energy supply and reducing the sector’s vulnerability to climate change and variations in weather patterns. Steps have been taken to reduce the country’s vulnerability through the supporting of short-term complementary power imports to maintain the adequate reservoir levels in Drin Cascade, the construction of interconnection line to Kosovo), and other market operation facilities. The World Bank Group is also leading a program to strengthen the safety of the dams on the Drin Cascade through the Energy Community of South East Europe Dam Safety Project (2008), together with other development partners.

Agriculture is a main source of employment and income in the rural areas, contributing 21% of Gross Domestic Product (GDP) and accounting for about 43.3 % of total employment. Albania’s agricultural sector continues to face a number of challenges, including small farm size and land fragmentation, poor infrastructure, market limitations, limited access to credit and grants and inadequate rural institutions. The Bank has supported agriculture in Albania through several projects. They had a positive impact in poverty reduction by increasing the income of small private farmers and creating employment opportunities for dependent farm labor in rural areas. These projects also contributed to sustainability of irrigation and drainage investments through farmer participation in operation and maintenance, efficient system management and greater cost recovery.

More than 335,000 hectares of Albania’s irrigation and drainage system was rehabilitated or upgraded. This represents two-thirds of irrigated land. Thirty-three dams were rehabilitated. More than 100,000 families have benefited from the irrigation schemes. The microfinance program provided over 47,000 loans for income-generation activities in 380 villages and 8 districts. Support to farmers in production and trade contributed to rural income growth. Through a World Bank financed project four wholesale markets built in Korca, Lushnja, Vlora and Shkodra facilitated the marketing of local agriculture products. A total of 145 grants were awarded to farmers with an impact on more than 20,000 farmers who were exposed to new technologies. Now the challenge is to transform agriculture from subsistence-oriented production into a modern, commercial, and competitive sector, while fostering alternative income opportunities for rural residents exiting the sector. The ongoing Water Resources and Irrigation Project (WRIP) aims to strengthen the Government’s capacity to manage water resources at the both national, river basin and local levels, to improve the performance and sustainability of irrigation systems in the Drin-Buna and Semani river basins, and  to implement integrated water management policies and river basin management plans.

Environment: The government of Albania is implementing a wide range of policies in the field of environment protection and natural resources management. Albania is moving toward gradual approximation of its laws with the environmental legislation of the EU. The completed Natural Resources and Development Project helped reduce erosion by improving the management of Albania’s wetlands, forest, and pasture resources, as well as creating water catchments. This project enhanced productivity and incomes by improving community-based natural resource management in 251 communes in mountainous areas prone to erosion. Land erosion has fallen by 220,000 tons. The implementation of the plans created some 6000 jobs, including 1900 women and 1900 beneficiary families. A follow-up project is being prepared to improve and promote the value of ecosystem services, in partnership with SIDA. Through biomass regeneration, forest-dependent communities successfully participated in the global BioCarbon Fund program, which supports, on a pilot basis, reducing GHG emissions though improved biodiversity and natural resource management improvements and provides additional resources to local communities.

The Integrated Coastal Zone Management Project supported the improvement of critical public environmental infrastructure and municipal services of the southern coast. The ongoing Environmental Services Project aims to support sustainable land management practices and increase communities’ monetary and non-monetary benefits in the targeted project areas that are mainly in erosion-prone rural upland areas. The project will particularly focus on enhancing the financial, economic, and institutional sustainability of land use and natural resource management and on helping build the capacities of Albania farmers, community organizations, and government institutions to efficiently use EU funding.

Public Sector: With the prospect of a country potentially to open the negotiations with EU, Albania faces even a bigger challenge of having a sound financial management framework, a meritocratic public administration and efficient monitoring and evaluation systems in place. The public sector performance is crucial to the country's ambition to gain EU membership and Albania has made good progress in some of the above areas.

The Bank is supporting a number of programs in close cooperation with several development partners. A number of Trust Funds is supporting the strengthening of an integrated planning system, public sector accounting and reporting, and capacity building of the financial supervisory authorities.

The ongoing Citizen Centric Service Delivery Project aims at improving service delivery, increasing transparency, reducing scope for corruption and enhancing the accountability of government. This project supports government’s efforts towards large scale regulatory reform. Increasing the number of on-line provided services, process re-engineering, and move towards full automation of administrative services offered to citizens, are key elements of this project.


Albania: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments