Challenge

Albania’s key challenges include the need to accelerate growth and create jobs. The high pre-crisis growth rate of 6 percent was fueled largely by domestic consumption driven by the high level of remittances. In the aftermath of the 2008 financial crisis, growth dropped to only 1.7 percent a year in 2013 and 2014; the crisis also exposed the unsustainability of this past growth model and highlighted the need to shift from consumption-fueled to investment- and export-led growth.

There are now early signs of this investment- and export-led recovery, propelled by ongoing reforms in the energy sector, financial sector pensions and fiscal management. Deeper efforts are needed to accelerate inclusive economic growth with the aim of maintaining macro-fiscal and financial sector sustainability, improving the investment climate and unleashing private sector growth, removing barriers to employment for job creation, and improving governance and public service delivery.

Enhancing regional connectivity and access to regional and global markets, coupled with export and market diversification, can help accelerate growth. These aspects are recognized in Albania’s National Strategy for Development Integration, which targets reforms for economic recovery, job creation, and more efficient social service delivery. Maintaining reform momentum through resolute implementation is critical to Albania’s continued economic growth and aspirations for EU integration. Back to top

Approach

In the decades since Albania emerged from communist isolation, the World Bank Group (WBG) has played a major role in supporting reforms, strengthening institutions, and financing investments across a range of sectors.

With prolonged low investment and growth after the global financial crisis, amid reversed poverty reduction and increased macroeconomic and fiscal imbalances, the Government initiated a broad-based reform program with International Monetary Fund (IMF) and WBG support. The Government’s six cross-cutting priorities—macroeconomic and fiscal sustainability, competitiveness, governance and accountability in public services, energy, land, and water—are reflected in its National Strategy for Development and in the Systematic Country Diagnostic (SCD) for Albania.

The WBG’s Country Partnership Framework (CPF) FY15–19 significantly boosted Bank engagement, outlining US$ 1.2 billion in lending support for Albania’s reforms, equitable growth, and integration into the EU. The CPF’s strategic engagement focuses on restoring macroeconomic balances, creating conditions for accelerated private sector growth, and strengthening public sector management and service delivery.

Results

Results under the current CPF and the previous FY10–14 Country Partnership Strategy (CPS) include:

Country Partnership Framework

• Public sector arrears, at more than 5 percent of GDP in 2013, were cleared by the Government in 2015.
• With the energy sector’s improved financial situation, government guarantees were reduced by half in 2015, compared to 2013.
• Energy sector distribution losses declined to 31 percent in 2015, compared to 49 percent in 2013.
• The energy sector’s billing collection rate reached 98 percent in 2015, from 78 percent in 2013.
• Nearly 2,140 previously ineligible Albanians had access to a social pension in 2016.
• A €200 million Policy-Based Guarantee in 2015 addressed the Government’s funding needs and minimized borrowing costs and also helped save €120 million in interest payments.

Country Partnership Strategy

• Rehabilitation works were completed in 11 irrigation dams during 2009–13.
• An EU-compliant National Metrology Laboratory was established, an EU-compliant regulatory framework for inspections was adopted, and 175 government officials received associated training during 2010–12.
• A new National Inspectorate was established in 2012, reducing the number of inspectorates from 36 to 15.
• Of the over 50 countries assessed under the Bank’s Debt Management Performance Assessment (DeMPA) program, Albania is among the few with sound debt management practices in most areas, as defined by DeMPA methodology.
• 110 kilometers of secondary and local road networks were rehabilitated or constructed, connecting 81 communities by road to services and markets during 2009–12.
• The triple shifting of classrooms was eliminated and double shifting reduced from 36 to 16 percent in basic education and 6 percent in secondary education during 2005-12.
• Income generated from improved forestry, agricultural lands and water resources increased by 28 percent and sedimentation was reduced by 200,000 tons in about 250 rural communities in 2012 compared to 2005.
• One of the first countries to sequester carbon by restoring 5,427 hectares of degraded lands. In July 2013, 128,757 certified emission reductions (CERs) were issued by the United Nations Framework Convention on Climate Change. On this basis, the World BioCarbon Fund transferred US$ 450,000 carbon payments to Albania.
• 45,000 square meters of hazardous waste have been encapsulated in safe landfill facilities, and human health hazards were cleaned up in 2010 at Porto Romano, revitalizing one of the most contaminated sites in Albania.

Albania was declared compliant with the Extractive Industries Transparency Initiative (EITI, the global standard of open and accountable natural resource management) in May 2013, after the successful publishing of four EITI reports between 2009 and 2012.

Source: Worldbank,org