2016 Index of Economic Freedom

Albania

overall score65.9
world rank59
Rule of Law

Property Rights35.0

Freedom From Corruption33.0

Limited Government

Government Spending75.0

Fiscal Freedom87.8

Regulatory Efficiency

Business Freedom67.6

Labor Freedom51.5

Monetary Freedom81.7

Open Markets

Trade Freedom87.6

Investment Freedom70.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 2.8 million
  • GDP (PPP):
    • $31.6 billion
    • 2.1% growth
    • 2.3% 5-year compound annual growth
    • $11,377 per capita
  • Unemployment:
    • 16.1%
  • Inflation (CPI):
    • 1.6%
  • FDI Inflow:
    • $1.1 billion
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Albania’s economy has benefited substantially from increased openness and flexibility over the past decade. 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.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 65.9 (up 0.2 point)
  • Economic Freedom Status: Moderately Free
  • Global Ranking: 59th
  • Regional Ranking: 27th in Europe
  • Notable Successes: Trade Freedom and Monetary Freedom
  • Concerns: Property Rights, Corruption, and Labor Freedom
  • Overall Score Change Since 2012: +0.8

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Background

Socialist Edi Rama was elected prime minister in June 2013, defeating eight-year conservative incumbent Sali Berisha. As promised, Rama secured European Union candidacy status in June 2014. Albania achieved full membership in NATO in April 2009 and continues to make a small contribution to the NATO-led mission in Afghanistan. A Strategic Partnership agreement with the U.S. is intended to increase cooperation, including improvements in the rule of law. Albania receives significant foreign direct investment to fund development of its oil and natural gas resources. Its transportation and energy infrastructure remain poor by European standards. The economy is dominated by agriculture, which employs about half of the workforce, and services, including tourism. Growth is tepid, hampered by high public debt and corruption.

Rule of LawView Methodology

Property Rights 35.0 Create a Graph using this measurement

Freedom From Corruption 33.0 Create a Graph using this measurement

The arrest of the central bank governor in September 2014 may be a turning point in attitudes toward malfeasance as Albania seeks to join the European Union. The EU is demanding reforms in the judiciary and law enforcement agencies to combat deeply rooted corruption and organized crime. Judges sometimes face threats and physical violence. Protection of intellectual and real property rights is weak, particularly for land tenure.

Limited GovernmentView Methodology

The top individual income tax rate is now 23 percent, and the top corporate tax rate is 15 percent. Other taxes include a value-added tax and an inheritance tax. The overall tax burden equals 21.7 percent of total domestic income. Government expenditures stand at 28.9 percent of GDP, and public debt, which has increased since 2007, has reached a level equal to over 70 percent of GDP.

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. Government subsidies and price controls distort domestic prices for electricity, water, agricultural products, and railroad transportation.

Open MarketsView Methodology

Albania’s average tariff rate is just 1.2 percent, and its trade and investment policies are much more open than the global average. The government officially welcomes investment in most sectors of the economy. The banking sector, which remains relatively well capitalized, 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 Download Charts

Regional Ranking

rank country overall change
1Switzerland810.5
2Ireland77.30.7
3Estonia77.20.4
4United Kingdom76.40.6
5Denmark75.3-1.0
6Lithuania75.20.5
7The Netherlands74.60.9
8Germany74.40.6
9Luxembourg73.90.7
10Iceland73.31.3
11Czech Republic73.20.7
12Georgia72.6-0.4
13Finland72.6-0.8
14Sweden72-0.7
15Austria71.70.5
16Norway70.8-1.0
17Latvia70.40.7
18Poland69.30.7
19Cyprus68.70.8
20Spain68.50.9
21Belgium68.4-0.4
22Macedonia67.50.4
23Armenia67-0.1
24Malta66.70.2
25Slovakia66.6-0.6
26Hungary 66-0.8
27Albania65.90.2
28Bulgaria65.9-0.9
29Romania65.6-1.0
30Portugal65.1-0.2
31Montenegro64.90.2
32France62.3-0.2
33Serbia 62.12.1
34Turkey62.1-1.1
35Kosovo61.4N/A
36Italy61.2-0.5
37Slovenia60.60.3
38Croatia59.1-2.4
39Bosnia and Herzegovina58.6-0.4
40Moldova57.4-0.1
41Greece53.2-0.8
42Russia50.6-1.5
43Belarus48.8-1.0
44Ukraine46.8-0.1
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