IMF Executive Board Concludes 2025 Article IV Consultation with Albania

IMF News, December 23, 2025

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Albania enjoys one of the highest growth rates in Europe, low inflation, declining public debt, and strong foreign reserves.
Growth projections:
- Real GDP growth: 3.5 percent in 2025 and 3.6 percent in 2026.
- Post-pandemic average real GDP growth: 4.3 percent.
Inflation and external balance:
- Headline inflation: projected to increase from 2.2 percent in 2025 to the 3 percent target in the second half of 2026.
- Current account deficit: projected at 2.8 percent of GDP in 2025, gradually widening to about 3.5 percent of GDP over the medium term.
Drivers:
- Growth primarily driven by private consumption and a booming tourism sector.
- Direct effects from U.S. tariffs are minimal; indirect effects from global trade measures and uncertainty appear limited so far.
Policy context:
- The government is advancing reforms to secure EU membership by 2030.

External downside risks:
- Geopolitical tensions, escalating trade measures, commodity price volatility, and prolonged uncertainty could weaken external demand.
- Global financial market volatility and asset price corrections could reduce demand for Albanian sovereign debt and create rollover risks.
Domestic downside risks:
- A sharper-than-anticipated decline in the working age population could exacerbate labor shortages, fuel inflation, necessitate tighter monetary policy, and dampen growth.
Upside potential:
- Sustained implementation of the EU reform agenda could boost productivity and growth.

Albania is one of the fastest growing economies in Europe, with output well above its pre-pandemic trend due to tourism.
Fiscal discipline has led to a significant reduction in public debt; proactive monetary policy has helped bring headline inflation below target.
External imbalances have shrunk and foreign reserves are strong; external position assessed as stronger than implied by fundamentals.
Structural challenges remain:
- Income per capita at just a third of the EU level.
- Wide reform gaps in human capital, governance, and business regulation.
Near-term outlook positive, but medium-term sustainability requires comprehensive reforms.

Fiscal trajectory and risks:
- Albania projected to maintain non-negative primary balances in 2025-30, with public debt falling below 50 percent of GDP.
- Rising spending pressures from demographic shifts, defense obligations, and climate-related spending, particularly beyond 2030.
Staff recommendations to safeguard fiscal buffers:
- Growth-friendly revenue reforms—streamline tax expenditures, modernize property tax systems, and enhance tax administration.
- Improve spending quality and fiscal transparency.
- Use well-targeted social assistance rather than planned monthly pension bonuses to support vulnerable households.
Specific risk:
- The “Fiscal Peace” Agreement, offering debt cancellation and preferential revaluation of financial statements, risks undermining progress in tax administration and compliance.

Current stance:
- Policy rate: 2.5 percent.
- Monetary policy stance: close to neutral; inflation expectations and core inflation close to target.
Recommendations:
- BoA should be ready to quickly respond to evolving market conditions and swiftly adjust monetary stance if second-round wage effects are stronger than expected.
- Limit FX purchases to addressing non-fundamental fluctuations.
- Allow greater exchange rate flexibility and rely on interest rates for price stability, since sustained exchange rate appreciation is largely driven by fundamentals.
- Objectives of the central bank subsidized credit line could be better achieved through targeted fiscal policies and addressing structural issues.

Key vulnerabilities:
- Large-borrower exposures, FX exposures, sovereign exposures, and rapid growth of real estate lending.
Priorities and recommendations:
- Vigilant monitoring and proactive prudential policymaking.
- Enhance capital adequacy compliance and ensure a smooth transition to IFRS.
- Recent relaxations in risk-adjusted capital adequacy and large exposure frameworks for strategic transport infrastructure loans are not fully aligned with international standards and warrant reconsideration.
- Borrower-based measures for new residential real estate loans are important structural tools; improve data availability for commercial real estate lending.
- Move toward a positive neutral rate for the countercyclical capital buffer and finalize the systemic risk buffer framework.
- New Albanian development bank requires strong governance and oversight.

Reforms needed to revive productivity and foster income convergence with the EU:
- Improve skills through broader training coverage and education quality.
- Create high-quality jobs and boost overall firm productivity.
- Enhance the business environment through further governance reforms.
Anti-corruption and rule of law:
- Stronger preventive legislation and improved monitoring of public administration are essential.
- Safeguard SPAK’s operational independence and resources.

Output
- Real GDP growth (%): 2024: 4.0; 2025: 3.5; 2026: 3.6; 2027: 3.4; 2028: 3.2; 2029: (not listed); 2030: (not listed)
Employment
- Unemployment rate (%) 1/ (15-64 years old): 2024: 9.4; 2025: 9.3; 2026: 9.2; 2027: 9.1; 2028: 9.0; 2029: 8.9; 2030: 8.8
Prices
- Inflation (%, end-period): 2024: 2.1; 2025: 2.4; 2026: 3.0
General government finances (percent of GDP)
- Revenues (% of GDP): 2024: 28.2; 2025: 29.0; 2026: 29.3; 2027: 29.5; 2028: 29.7
- Expenditures (% of GDP): 2024: 28.7; 2025: 30.6; 2026: 31.3; 2027: 31.8; 2028: 32.0; 2029: 31.9
- Primary balance (% of GDP): 2024: 1.7; 2025: 0.4; 2026: 0.2; 2027: 0.0
- Fiscal balance (% of GDP): 2024: -0.4; 2025: -1.7; 2026: -2.0; 2027: -2.2; 2028: -2.3
- Public debt (% of GDP): 2024: 54.5; 2025: 52.7; 2026: 51.6; 2027: 50.8; 2028: 50.0; 2029: 49.3; 2030: 48.7
Money and credit
- Broad money (% change): 2024: 4.9; 2025: 6.5; 2026: 6.0; 2027: 6.3
- Credit to the private sector (% change): 2024: 12.3; 2025: 11.5; 2026: 9.5
Balance of payments
- Current account (% of GDP): 2024: -2.5; 2025: -2.8; 2026: -2.9; 2027: -3.0; 2028: -3.2; 2029: -3.4; 2030: -3.5
- FDI (% of GDP, net): 2024: -5.4; 2025: -5.1; 2026: -5.0; 2027: -4.9; 2028: -4.8
- Reserves (months of imports): 2024: 7.0; 2025: 7.5; 2026: 7.4; 2027: 7.3; 2028: 7.2; 2029: 7.1; 2030: 6.9
- External debt (% of GDP): 2024: 40.7; 2025: 39.8; 2026: 39.2; 2027: 38.8; 2028: 38.3; 2029: 37.8; 2030: 35.8

Source: IMF Executive Board press release — IMF Executive Board Concludes 2025 Article IV Consultation with Albania.