ALBANIA

Economic Freedom Score

25 50 75 100 free
Most Least free 0

World Rank:

58

Regional Rank:

27

65.2

economic freedom score 65.2, making its econA lbaniasby58th point,in thedeclinesisin property rights and omy the freest 2013 Index. Its overall score has increased 0.1 with

Freedom Trend
67 66 65 64 63 62

labor freedom offset by improvements in business freedom and the management of public finance. Albania is ranked 27th among the 43 countries in the Europe region, and its overall score is above the world average. Albanias economy has benefitted substantially from a decade of increased openness and flexibility and weathered the immediate impact of the global economic crisis relatively well. Over the past two years, however, economic dynamism has slowed. Expansionary public spending that the government hoped would mitigate some of the pain of necessary adjustments has resulted in budget deficits and rising public debt, now near 60 percent of GDP. 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. Deeper institutional reforms to reduce labor market regulations and increase the efficiency of the judiciary, which remains subject to political interference, are critical to further success. Corruption continues to undermine the prospects for long-term economic development. backgRound: Albania remains one of Europes poorest countries despite economic and political reforms since the end of Communist rule in 1992. Sali Berisha has been prime minister since 2005. His government, a coalition of the center-right Democratic Party and the Socialist Movement for Integration, is known for its strong focus on Euro-Atlantic integration. Albania signed a Stabilization and Association Agreement with the European Union in June 2006 and submitted a full application for membership in April 2009. It achieved full membership in NATO in April 2009 and continues to contribute troops to the NATO-led mission in Afghanistan. Transportation and energy infrastructure are poor by European standards, and the economy is dominated by agriculture and services, including tourism.
See page 477 for an explanation of the methodology or visit the Index Web site at heritage.org/index.

2009

2010

2011

2012

2013

Country Comparisons
Country World Average Regional Average Free Economies
0 20 40 60 80

65.2 59.6 66.4 84.5

100

Quick Facts
population: 3.2 million gdp (ppp): $24.9 billion 2.0% growth in 2011 5-year compound annual growth 4.4% $7,741 per capita unemployment: 13.5% inflation (cpi): 3.4% fdi inflow: $1.0 billion public debt: 58.9% of GDP
2011 data unless otherwise noted. Data compiled as of September 2012.

How Do We Measure Economic Freedom?

101

ALBANIA (continued)
THE TEN ECONOMIC FREEDOMS
Country World Average Rank

RULE OF LAW

Property Rights 30.0 Freedom from Corruption 31.0

0 20 40 60 80 100

94th 93rd

Albania still lacks a clear property rights system, particularly for land tenure. Security of land rights remains a problem in coastal areas where there is potential for tourism development. Significant reform of the legal system is ongoing, but the courts are subject to political pressure and corruption. Protection of intellectual property rights is weak. Albania is a major transit country for human trafficking and illegal arms and narcotics.

LIMITED GOVERNMENT

Fiscal Freedom 92.6 Government Spending 75.1

0 20 40 60 80 100

20th 63rd

Personal and corporate tax rates are a flat 10 percent. Other taxes include a value-added tax (VAT) and an inheritance tax. The overall tax burden equals 23.3 percent of total domestic income. Government expenditures stand at 28.8 percent of GDP, and public debt, which has increased since 2007, is around 60 percent of GDP. The 2012 budget included increases in government wages and pensions, causing some concern over rising debt levels.

REGULATORY EFFICIENCY

Business Freedom 81.0 Labor Freedom 49.0 Monetary Freedom 78.4

0 20 40 60 80 100

30th 133rd 56th

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. With international commodity prices stable, inflationary pressures have eased and allowed the central bank to lower interest rates to stimulate domestic demand.

OPEN MARKETS

Trade Freedom 79.8 Investment Freedom 65.0 Financial Freedom 70.0

0 20 40 60 80 100

69th 56th 17th

The trade-weighted average tariff rate is 5.1 percent. There are few formal non-tariff barriers, but inadequate infrastructure and administrative bureaucracy add to the cost of trade. Foreign and domestic firms are generally treated equally under the law, but there are restrictions on foreign ownership of land. Excessive bureaucracy discourages dynamic investment. Banking consists mainly of subsidiaries of foreign banks and remains relatively stable.

Score Changes
RULE OF LAW
Property Rights Freedom from Corruption
102

LIMITED GOVERNMENT
5.0 2.0 Fiscal Freedom Government Spending +1.2 +5.6

REGULATORY EFFICIENCY
Business Freedom +2.8 Labor Freedom 2.0 Monetary Freedom 0.2

OPEN MARKETS
Trade Freedom Investment Freedom Financial Freedom

0 0 0

2013 Index of Economic Freedom