Albania WT/TPR/S/229/Rev.1 
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I. ECONOMIC ENVIRONMENT 
(1) OVERVIEW  
1. During the period under review (2002-09), Albania achieved solid economic growth, 
averaging 5.8% on an annual basis between 2002-08.  This fast pace of growth was driven by strong 
domestic demand and supported by significant flows of  foreign direct investment and remittances 
from workers abroad.  Per capita GDP in nominal  terms more than doubled over the period, and 
human development indicators suggest considerab le improvements.  Albania has succeeded in 
reducing government debt, increasing tax revenue, s ubstantially lowering unemployment, and keeping 
inflation low and within the targets established by the Central Bank.  These developments have taken 
place in the context of a remarkable transforma tion of the Albanian economy over the past two 
decades, from a closed, centrally-p lanned economy to one that is liberal, market-orientated, and 
private-sector driven.  
2. Sound macroeconomic polices, in particular a cr edible monetary policy and a comprehensive 
tax reform, have underpinned Albania' s fast growth in recent years, and have complemented the effect 
of trade liberalization and structural reform.  Th ese sound policies, by triggering stable growth and 
low inflation, have accelerated the insertion of Albania in the global economy, facilitated its 
participation in the multilateral trading system, and helped to distribute the gains resulting from trade 
and investment liberalization widely among the population. 
3. While the global economic and fi nancial crisis has had a negative impact on the Albanian 
economy, evidence suggests that the effects so far have not been too severe, with GDP growing at 
over 4% in the 12 months to September 2009.  The uncertainty generated by the crisis prompted the 
withdrawal of 8% of total bank deposits, and credit growth slowed due to a reluctance on the part of 
banks to lend and to declining demand.  As noted  by the IMF, however, these withdrawal requests 
were met without posing any strain on the system, as  prudential supervisory pol icies required banks to 
have large liquidity buffers.  Deposits  have been returning gradually.     
4. Among the key challenges facing Albania are to  continue to reduce the increasing fiscal 
imbalances and the levels  of public debt, while at the same time pursuing structural reform and 
investing in the infrastructure needed to improve the business environment and enhance productivity.  
Given that a marked reduction in financial s upport from external donors is envisaged, and the 
Government's key assets have largely been privatized , alternative sources of revenue will need to be 
found and cost-efficiencies made.  In this context,  Albania's efforts to develop a modern and open 
government procurement regime (Chapter III(4)(v)) are an important step, and reform efforts in this 
area should be continued.  Productivity in agriculture  is lower than in other sectors, while it employs 
almost half of the Albanian workforce.  Although progress has been made in increasing productivity, more jobs in other areas, particularly services, n eed to be created, and promotion of efficiency and 
modernization of agriculture needs to continue.  Th is may also have the bene fit of reducing Albania's 
reliance on food imports and its  related exposure to commodity price fluctuations.   
(2) O
UTPUT AND EMPLOYMENT  
5. The Albanian economy has expanded at a very rapid pace during the past decade, at an 
average annual rate of 5.8% in the 2002-08 period , almost doubling in lek during this period, and 
almost tripling in U.S. dollar terms.  Refl ecting this, Albania's per capita GDP has grown 
considerably, from just over US$1,437 in 2002 to an estimated US$4,073 in  2008, although it still 
remains relatively low compared with that of othe r European countries.  Gross National Income (GNI) 
per capita, in U.S. dollars, as measured by the World Bank's Atlas method, was US$3,290 in 2007, WT/TPR/S/229/Rev.1 Trade Policy Review 
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substantially lower than the average for Europe an d Central Asia (US$6,052 in the same year), but 
higher than the average for lower- middle-income countries (US$1,887).1   
6. Considerable progress has also been achieved with respect to social and educational 
indicators.  In its 2009 Human Development report UNDP  classified Albania as having a high level of 
human development, ranking it 70th out of 177 countries, based on a range of indicators.2  A decade 
earlier, Albania was categorized as having a medi um level of human deve lopment, and ranked 94th out 
of 174 countries.3   
7. Expenditure-based GDP figures, at market pric es, are produced with some delay;  in 
January 2010, the latest final available data were  for 2007.  These showed that the Albanian economy 
grew at an annual average of 5.5% (Table I.1).  Growth for 2008 has been estimated at 7.8%, largely 
driven by strong domestic demand, supported by signif icant foreign direct investment flows, which in 
turn are partly attributable to a major privatization effort (Chapter III(4)(iii)).4  Domestic demand has 
systematically exceeded GDP not only in growth  terms, but also in money terms, since the 
contribution of net exports to growth has been  traditionally negative.  Remittances from workers 
abroad, which represented between 10.2% and 14.1% of GDP during 2002-08, have boosted 
disposable income and been a major force behind th e strong growth of domestic demand, in particular 
private consumption. 
Table I.1 
Basic economic indicators, 2002-09  
 2002 2003 2004 2005 2006 2007 2008 2009 
III 
Current GDP market prices, (lek  million) 622,711 694,098 750,785 814,797 882,209 966,651 1,087,867 .. 
Current GDP (US$ million) 4,443.1 5,695. 7 7,305.0 8,158. 5 8,992.7 10,689. 7 12,967.1 ..  
Current GDP (€ million) 4,704.6 5,047. 7 5,880.5 6,561. 0 7,167.7 7,819. 2 8,858.6 ..  
Per capita GDP (US$ dollars) 1,437 1,831 2,336 2,597 2,854 3,394 4,073 ..  
Per capita GDP (euros) 1,521   1,622 1,881 2,088 2,275 2,491 2,785 ..  
Per capita GDP (lek' 000) 201 223 240 259 280 306 342 ..  
Per capita GDP, growth rate (%) 6.0 10.8 7.6 8.0 8.0 9.6 8.0 ..  
GDP by sector,  basic prices  (% growth rate) 
Real GDP  4.4 6.0 5.7 5.7 5.4 5.9 8.0 4.1 
  Agriculture, hunting and 
forestry 2.1 2.9 6.3 0.9 3.1 2.6 7.7 2.8 
   Industry -5.1 29.0 14.1 11.7 12.1 -10.3 9.4 -4.5 
   Construction 21.5 23.4 7.9 6.3 10.5 10.1 4.8 -0.7 
   Services 3.8 0.6 2.8 6.2 4.2 9.4 8.4 7.9 
GDP by type of expenditure  (% real growth rate, market prices)  
GDP  4.2 5.8 5.7 5.7 5.4 6.0 7.8 ..  
Domestic demand, contribution to 
growth (%) 13.0 17.2 10.0 10.4 11.0 15.3 .. ..  
Private consumption  13.3 12.0 12.2 8.5 7.2 13.9 12.6 ..  
Consumption of NPISHs 14.3 14.3 14.2 14.2 15.0 8.3 12.6  .. 
Public consumption 14.7 8.6 9.1 7.3 1.02 10.0 1.5  .. 
Gross fixed capital formation 5.5 19.0 -0.5 7.9 14.1 9.0 6.9 ..  
Net exports of goods and services 28.4 11.4 -2.0 19.4 3.6 24.2 12.2  .. 
Exports of goods and services 13.5 15.8 16.8 12.6 18.3 23.7 17.6  .. 
Imports of goods and services 21.4 13.3 6.5 16.1 10.7 24.0 14.9  .. 
GDP by type of expenditure  (% of current GDP)  
Private consumption 74.7 75.1 77.9 77.9 77.1 80.2 80.2  .. 
Government consumption 11.2 10.9 11.0 10.9 10.1 10.2 9.2  .. 
      Table I.1 (cont'd) 
                                                      
1 World Bank online information.  Viewed at:  http://devdata.worldbank.org/AAG/alb_aag.pdf. 
 2 UNDP (2009). 
 3 UNDP (2000). 
4 The EU has noted that strong and sustained economic growth in 2008 has been driven by large public 
investments in the upgrading of the national road network and higher public spending on health and education.  ECFIN (2009). Albania WT/TPR/S/229/Rev.1 
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 2002 2003 2004 2005 2006 2007 2008 2009 
III 
Consumption of NPISHs  0.1 0.1 0.1 0.1 0.2 0.2 0.2  .. 
Gross fixed capital formation 37.9 40.5 37.2 37.0 39.0 38.8 36.8  .. 
Net exports of goods and services. -24.7 -24.7 -22.4 -24.6 -23.6 -26.7 -26.7 .. 
Exports of goods and services  19.6 20.4 22.0 22.8 24.9 28.2 29.4  .. 
Imports of goods and services  44.3 45.1 44.4 47.5 48.5 54.9 56.1  .. 
Change in inventories & 
statistical discrepancy 0.8 -1.8 -3.8 -1.2 -2.8 -2.5 0.3  .. 
Memo items (% of GDP)  
Gross domestic savings  17.4 20.3 22.4 22.8 23.6 20.8 21.2 .. 
  Public 0.0 -0.5 -0.3 0.5 1.9 2.2 3.1 ..  
  Private 17.4 20.7 22.6 22.3 21.7 18.6 18.2 ..  
Investment  24.5 25.4 26.3 28.9 29.1 29.9 32.0 .. 
  Public 6.7 4.5 5.1 4.7 5.6 5.8 8.1 ..  
  Private 17.8 20.9 21.2 24.2 23.5 24.1 23.9 ..  
Foreign savings  7.2 5.2 4.0 6.1 5.6 9.1 10.8 .. 
Average gross monthly real 
wages (% change) .. 13.1 -5.8 2.5 5.0 15.3 8.9 ..  
.. Not available. 
NPISHs Non-profit instituti ons serving households. 
Source:  Bank of Albania online information.  Viewed at: http ://www.bankofalbania.org;  IN STAT online information.  
 Viewed at:  http://www.instat.gov .al/graphics/doc/tabelat /Treguesit%20Ekonomik/Lloga rite%20Kombetare/LLK2 
 008_2/tab14.xls. 
 
8. Sectoral-based GDP figures, at basic prices, whic h are more up-to-date, show a rather positive 
picture throughout the 2002-09 period.  Among econom ic sectors, the evolution of construction was 
particularly dynamic.  Albania seems to have escap ed the worst effects of the global economic crisis, 
avoiding a recession;  according to INSTAT's data, GDP at basic prices expanded by 8% in 2008 and 
by 4.1% in the 12 months to the third quarter of 2009.  This was basically on account of a strong 
performance of the different services activities, and of construction. 
9. The Albanian economy is driven by the service s sector, which (excluding construction) in 
2008 accounted for some 57.6% of GDP at basic prices (f actor cost plus cost of intermediary financial 
services).  In recent years, services activities have  expanded much more ra pidly than traditional 
activities such as agriculture and manufacturing.  Within services, the largest contribution has been 
made by trade (which includes retail trade, sale an d repair of motor vehicles, and wholesale trade), 
and hotels and restaurants.  The share of agriculture, hunting and forestry is significant, but has declined steadily, from 23% of GDP in 2002 to 18% in 2008.  Construc tion increased from 12% of 
GDP in 2002 to 14% in 2008.  The manufacturing sector remains small, contributing 9% to GDP in 2008.   
10. Although agriculture has been declining, it still accounted for some 45% of total employment 
in 2008 (Table I.2), while its share of GDP was ju st 18%.  This highlights the existence of a dual 
economy:  on the one side a "modern" economy, comprising the highly productive services sector, which generates almost 60% of GDP and accounts for less than 38% of employment, as well as 
manufacturing and construction;  and on the other si de a traditional, declining agriculture sector, with 
very low productivity.  As a result of structural  reform, but also as a consequence of migration, 
Albania reduced unemployment from 16.4% of the labour force in 2002 to 13.0% in 2008.  One of the 
key challenges is to continue this trend in the face of fewer short-to-medium-term opportunities for 
employment in neighbouring countries following the gl obal recession.  In addition, the challenge of 
modernizing and reforming agriculture sector is likel y to entail job losses in the sector, which sustains 
the livelihoods of over half of the population.  Given that the manufacturing sector in Albania is 
small, investment will need to be made in the services sector in order to create employment.   WT/TPR/S/229/Rev.1 Trade Policy Review 
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Table I.2 
Sectoral data on GDP and employment, 2002-08   
 2002 2003 2004 2005 2006 2007 2008 
Structure of GDP at basic prices (including financial intermediation)  
Agriculture, hunting and forestry 23 24 22 21 19 19 18 
Industry 7 9 10 11 11 9 10 
  - Extracting industry 1 1 1 1 1 1 1 
  - Manufacturing industry 6 8 9 10 10 8 9 
Construction 12 14 14 14 14 15 14 
Services 58 54 54 55 55 57 58 
  - Trade, hotels and restaurants 24 22 22 22 21 21 21 
  - Transport 7 5 5 6 5 5 5 
  - Post and communication 3 3 4 4 4 4 4 
  - Other services 23 23 23 24 25 26 27 
Structure of employment (% of total)        
Agriculture, forestry, fishery 58 58 59 58 58 48 45 
Extracting industry 1 1 1 1 1 1 1 
Manufacturing industry 5 5 6 6 6 9 7 
Electric power, water industry 2 2 1 1 1 1 2 
Construction 6 6 6 6 6 8 8 
Services 29 28 28 29 29 34 38 
  Trade 7 7 7 7 7 11 12 
  Hotels and restaurants 2 2 2 2 2 3 4 
  Transport and communications 4 3 2 2 2 4 4 
  Education 5 5 5 5 5 5 5 
  Health 3 3 3 3 3 2 3 
  Others 8 8 9 10 10 8 10 
Memorandum        
Population (million) 3.1 3. 1 3.1 3.1 3. 2 3.2 3.2 
Unemployment rate (%) 16.4 15.0 14.4 14.1 13.8 13.5 13.0 
Remittances (% of GDP) 14. 1 13.9 13.1 12.6 13.6 12.3 10.2 
Average wage in the public sector (lek) 19,659 21,325 24,393 26,808 28,822 33,750 36,537 
Official minimum wage (lek) 9,400 10,060 10,080 11,800 14,000 16,100 17,000 
Average wage in the public sector (€) 148.5 155.1 191.1 215.9 234.2 273.1 .. 
Official minimum wage (€) 71.0 73.2 79.0 95.0 113.7 130.3 .. 
.. Not available. 
Source:  Bank of Albania online information.  Viewed at: http://www.bankofalbania.org;   INSTAT online information.  
 Viewed at:  http://www.instat.gov .al/graphics/doc/tabelat/Treguesit%20S ociale/Punesimi/PUN%202008/ta4.xls.   
 Information provided by the authorities. 
 
(3) FISCAL POLICY  
11. Albania ran a General Government deficit over the whole 2002-09 period.  The deficit 
showed fluctuations, rather than a clear trend:  at its lowest point the cash deficit was 3.3% of GDP in 
2006, and it reached a peak of 7.9%  in 2008.  Tax revenue has been increasing steadily:  from nearly 
21% of GDP in 2002 to nearly 26% in 2009, part ly reflecting the Governme nt's tax reform process 
(Box I.1).  The objective is to increase this to 27% of GDP in 2010.  The VAT is the main source of 
Government revenue.  VAT levied  on imported goods accounted for 68.5% of total VAT collected in 
2008, and for 67.7% of total VAT in January-November 2009.   Reliance on customs duties is very 
low (at 0.5% of GDP in 2009) and has been d eclining over the review period.  Government 
expenditure decreased from 30.9% of GDP in 2002 to  28.5% in 2005.  Thereafter it grew, peaking in 
2008 at 34.3% of GDP, due to an increase in capita l expenditure, and declining in 2009 due to a 
decrease in capital expenditure.  Current expenditure  remained largely stable over the period 2002-09 
(Table I.3).   
12. Fiscal policy during 2008 and the first half of 2 009 was expansionary, with rapid growth of 
expenditure and a resulting increase in the budget defic it.  Revenue recorded more moderate growth, 
partially reflecting the economic slowdown.  Given these developments, the Bank of Albania Albania WT/TPR/S/229/Rev.1 
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considers it of utmost importance to keep budget deficit levels and public borrowing in check to 
dampen monetary market pressures.5 
Table I.3 
Fiscal accounts, General Government, FY 2002-09 
(Percentage of GDP) 
 2002 2003 2004 2005 2006 2007 2008 2009a 
Revenue 24.8 24.1 24.6 25.1 26.0 25.9 26.4 28.4 
Grants 0.7 0.4 0.3 0.8 0.9 0.7 0.4 0.5 
Tax revenue 20.7 20.9 22.1 22.6 23.3 23.4 24.4 25.9 
From tax office and customs 15.7 15.7 16.4 16.6 17.6 17.7 18.2 19.5 
   V.A.T.b 7.4 7.3 7.7 7.9 8.4 8.7 9.3 10.0 
   Profit tax 2.0 1.9 2.2 2.4 2.5 2.3 1.3 1.8 
   Excise tax 1.5 1.8 2.1 2.3 2.6 2.8 3.6 3.8 
   Personal income tax 1.0 0.9 0.9 0.9 1.0 1.1 1.5 2.2 
   National taxes and others 1.7 1.8 1.6 1.5 1.5 1.6 1.6 1.3 
   Customs duties 2.1 2.0 1.8 1.7 1.6 1.2 0.9 0.5 
Local taxes 0.8 1.1 1.3 1.5 1.3 1.3 1.4 1.6 
Social insurance contributions 4.1 4.1 4.4 4.4 4.5 4.4 4.7 4.9 
Non-tax revenue 3.5 2.8 2.1 1.7 1.8 1.7 1.5 1.9 
Expenditure 30.9 29.0 29.6 28.5 29.3 30.6 34.3 32.6 
Current expenditure 24.8 24.4 24.5 23.8 23.2 22.9 23.5 24.0 
Personnel expenditure 6.7 6.4 6.5 6.6 6.4 6.2 6.3 5.1 
   Wages .. .. .. .. .. 5.1 5.3 4.4 
   Social insurance contributions .. .. .. .. .. 1.0 1.0 0.7 
Interest 4.0 4.3 3.8 3.2 2.8 3.0 3.1 3.1 
Operational and maintenance 3.3 3.2 3.2 3.0 2.6 2.5 2.6 3.0 
Subsidies 1.0 0.7 0.7 0.4 0.4 0.3 0.2 0.2 
Social insurance outlays 6.4 6.4 6.7 6.9 6.8 6.8 7.1 8.1 
Local budget expenditure 2.0 2.0 2.1 2.4 2.6 2.6 2.7 3.1 
Other expenditures 1.4 1.3 1.5 1.2 1.6 2.2 2.4 2.8 
Capital expenditures 6.1 4.5 5.1 4.7 5.8 7.1 9.8 7.7 
   Domestic financing .. .. .. .. .. 3.8 3.6 5.8 
   Foreign financing .. .. .. .. .. 3.3 6.2 1.8 
Deficit (cash) -6.1 -4.9 -5.1 -3.5 -3.3 -4.8 -7.9 -4.2 
Financing (cash) 6.1 4.9 5.1 3.5 3.3 4.8 7.9 4.2 
Domestic 3.4 3.4 4.1 2.9 2.7 2.6 2.7 3.5 
Foreign 2.6 1.4 1.0 0.6 0.6 2.1 5.2 0.7 
.. Not available. 
a Projection. 
b Also includes Turnover Tax in 2007. 
Source:  Ministry of Finance. 
 
13. As set out in the Ministry of Finance's Public Finance Sector Strategy 2007-13, the 
Government's aim is to increase revenue collection, inter alia,  to:  pursue the reforms necessary to 
achieve integration into the European Union;  fina nce priority public investments, particularly in 
energy, water, and telecommunications;  and compen sate for an anticipated decline in grants and 
loans from international financial institutions and bilateral donors.  The Government envisages 
aligning taxation policies with European norms, and strengthening taxation policies, initially through 
the development of administrative capacity to collect taxes and achieving higher levels of compliance.  
Other tax reforms would be implemented to be tter support policies for equity and economic and 
business development.  On the expenditure side, the Government is committed to extracting better 
outcomes from Government spending through a variety of measures, including through improved forecasting, planning, and control.
6 
 
                                                      
5 Bank of Albania (2009c). 
6 Ministry of Finance (2007). WT/TPR/S/229/Rev.1 Trade Policy Review 
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Box I.1  Tax reform issues in Albania  
Albania has undertaken comprehensive tax reform in recent years, to streamline and modernize its taxation 
regime, improve collection, and reduce scope for discretion and tax evasion.  As a result of the reform the tax 
system is relatively flat, with few exceptions, and the rates applied are low by international standards.  The 
main aspects of the reform are: 
(a) Taxes on income and profits 
 Law No. 9,766, of 9 July 2007 introduced a flat rate regime for individual and company taxation.  A flat tax 
rate of 10% is applied on all personal and corporate incomes.  Dividends are also taxed at 10%.  Prior to the 
reform, corporate income tax was 20%.  A deduction of lek 10,000 on the taxable base may be applied on wages of up to lek 30,000 per month.  The tax reform package also included the elimination of some profit tax 
exemptions, e.g. deductions for sponsoring expenses, and exemptions for tourism businesses. 
The authorities are satisfied with the outcome of the reform, which resulted in a 65% increase in revenue 
collected from individual taxation in 2008 compared with 2007;  revenue from personal income taxes doubled 
from 1.1% of GDP in 2007 to an estimated 2.2% of GDP in 2009.  The authorities consider that tax reform has 
had a positive impact on the efficiency of the tax system, easing its administration and reducing the costs of compliance. 
(b) Taxes on labour 
Social contribution rates have declined in recent years.  Employers currently pay a rate of 15% on gross wages 
as social contribution on behalf of employees.  In 2006, the rate was 29%.  Total contributions for both health 
and social protection currently represent 28% of the gross wage (16.7% paid by the employer, and 11.2% paid by the employee). 
(c) Small business taxation 
The tax burden on small businesses (with an annual turnover less than lek 8 million) has been lowered by Law 
No. 9,632 of 20 October 2006.  Tax rates are differentia ted on the basis of regions, activities, and turnover, 
ranging between 1.7% and 8.5% of annual turnover. 
(d) New system of national taxes Law No. 9,975 of 28 July 2008, simplified Albania's taxation system considerably, reducing the number of 
national indirect taxes (other than the VAT) from 23 to 7 by eliminating and consolidating a number of taxes 
while transforming others to fees.  The remaining na tional taxes are:  the road circulation tax;  the 
environmental tax;  the port tax;  the mineral rent tax;  the stamp tax;  the tax for registration of casinos, 
gambling, etc.;  and the tax for fishing activities. 
Source: Ministry of Finance.
 
 
(4) MONETARY AND EXCHANGE RATE POLICY  
14. The Bank of Albania, an independent institution, is the monetary authority of Albania, and is 
mandated by Law No. 8,269 of 23 December 1997 to achieve and maintain price stability.7  T h e  
monetary policy strategy for 2009-11 maintains the key principles and arrangements pursued during 
recent years.  The Bank has interpreted achieving and maintaining price stability as pursuing low but 
positive inflation rates and preserving them for relative ly long periods of time.  It has a 3% inflation 
target, with a tolerance band of ± 1 percentage poi nt, which is its definition of price stability in 
quantitative terms.  The inflation target is measu red by the annual rate of change in the total 
Consumer Price Index (CPI), calculated and publis hed by the Albanian Institute of Statistics 
(INSTAT).  This target is applicable throughout 200 9-11, and was the same target fixed for 2004-08.  
The Central Bank considers that keeping the infl ation target stable and extending its time span 
contribute to better anchoring inflation expectations around the declared target.  The Bank also 
                                                      
7 Bank of Albania (2009e). Albania WT/TPR/S/229/Rev.1 
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considers that maintaining a target slightly highe r than the European Central Bank provides for the 
structural adjustments Albania needs as an emerging economy.   
15. Monetary policy decisions are based on an overa ll assessment of the m acroeconomic situation 
and on projections for price developments over the medium term.  In case of deviations from the 
target, the Bank's Supervisory Council makes a de cision to modify the interest rate on one-week 
(reverse) repurchase agreements, which is the Bank's key interest rate.8  The growth rate of M3 is also 
taken into account when analizing compliance with the inflation goal.  For 2009, the Bank of Albania 
estimated that an M3 growth rate of around 8% woul d comply with its inflation target.  M3 expanded 
by 7.3% in the 12 months to November 2009, belo w this estimated level, as uncertainty over the 
future performance of the economy as a consequence of the global economic crisis influenced both 
the supply of and demand for credit.  Associated with an increased perceived risk resulting from the 
financial crisis, lending interest rates increased more  than savings rates, lead ing to a widening of the 
interest rate spread (Table I.4). 
Table I.4 
Main monetary indicators, 2002-09 
(Per cent) 
 
2002 2003 2004 2005 2006 2007 2008 2009 
(November) 
Money and credit         
Base money 8.0 -2.0 11.2 11.0 9.8 4.9 19.1 11.0 
M1 (12-month rate of change) 7.0 -2.7 19.8 31.5 8.4 0.1 16.6 9.1 
M2 (12-month rate of change) 6.0 9.2 12.0 8.4 12.0 6.0 9.7 7.5 
M3 (12-month rate of change) 6.0 8.7 13.5 13.9 16.3 13.7 7.7 7.3 
Multiplier (M2/base money) 2.0 2.2 2.2 2.2 2.2 2.2 2.0 2.1 
Interest rates         
Repurchase rate .. .. 5.25 5.00 5.50 6.25 6.25 5.25 
Interest rate on deposits in lek         
Deposits rate (12-months) 9.25 7.62 5.99 5.57 5.46 6.33 6.86 6.77 
Deposits rate (6-months) 8.89 7.07 5.41 4.77 4.64 5.50 5.76 5.76 
Interest rate for lending in lek          
Lending rate (12-months) 15.98 10.52 13.73 12.16 11.16 13.55 11.11 12.29 
Lending rate (6-months) 14.63 11.81 10.98 12.90 12.18 13.85 11.18 12.91 
Securities rates          
T-Bills rate 3-months 11.08 7.32 6.15 5.40 6. 38 6.32 6.19 6.30 
T-Bills rate 12-months 12.61 9.56 8.10 6.80 7. 75 8.26 8.56 9.16 
Interest rate spread (6-months) 5.74 4.74 5.57 8.13 7.54 8.35 5.42 7.15 
Inflation         
Inflation target (+/- 1 pct. point) 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 
Consumer price index (year on 
year change) 1.7 3.3 2.2 2.0 2.5 3.1 2.2 3.5 (Dec.) 
Producer price index -1.4 14.6 10.8 5.1 0.1 4.1 6.5 0.0 
Exchange rate         
Exchange rate (lek/US$) 140.15 121.89 102.83 99.62 98.07 90.42 83.78 94.91 
Exchange rate ((lek/€) 132.42 137.49 127.79 124.34 123.08 123.63 122.77 132.05 
Change in real effective ratea 1.63 4.18 -7.64 -1.62 -1.01 0.34 0.04 4.77 
.. Not available. 
a The CPI-based real effective exchange rate is based on trade weights with Italy, Greece, Turkey, China and Germany, which are  
the main five trading partners of Albania.  A positive sign is an indicati on of lek depreciation. 
Source: Information provided by the authorities;   Bank of Albania (2008), Annual Report 2008 .  Viewed at:  
 http://www.bankofalbania.org/we b/Annual_Report_new_2611_2.php;  INST AT online information (CPI).  
 Viewed at:  http://www.instat.g ov.al/graphics/doc/tabelat/Tregu esit%20Ekonomik/Indeksi%20i%20Cmimeve% 
 20te%20Konsumit/ICK%202008/tab2.xls;  and INSTAT online in formation.  Viewed at:  http://www.instat.gov.al/ 
 graphics/doc/tabelat/Tregues it%20Ekonomik/Statistikat%20Monetare% 20e% 20Bankare/SMB 2007xls/smb1.xls. 
                                                      
8 The key interest rate, which is set by the Supervis ory Council of the Bank of Albania and is used in 
the weekly auctions of repurchase agr eements (repos), also serves as a reference rate for setting interest rates on 
the Bank’s overnight deposits and loans.  It also affects the interest rate in the interbank market, on lek deposits held with commercial banks, on Treasury bills, and on lek loans to the economy. WT/TPR/S/229/Rev.1 Trade Policy Review 
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16. Albania's monetary policy was tightened betw een 2005 and the first half of 2008.  In the 
second half of 2008, the Bank of Albania started to in crease the level of liquidity provided to banks to 
help them cope with the liquidity shortages triggere d by the global financial crisis, the main effects of 
which were felt between late Sept ember and December 2008, when 8%  of deposits were withdrawn 
(Box I.2).9  The withdrawals continued in the first quarter of 2009;  since April 2009, however, 
deposits have been gradually increasing and, by October 2009, had reached pre-crisis levels.  
Monetary policy was further relaxed and the repo rate reduced.  Credit growth declined in the 
aftermath of the crisis, reflecting mostly a contr action in foreign denominated loans.  The annual 
growth of credits in lek shows some recovery in the first half 2009 as the private sector's demand for 
lek-denominated loans met an increasing willingness from banks.10  Credit to the economy expanded 
by 10% in the eleven months until November 2009.   
Box I.2:  Response to the Effects of the Global Financial Crisis  
 
Although there was no direct effect of  the global financial crisis on Albania's banking system, as it was not 
involved in complex banking products, the crisis had an impact on confidence in the banking sector, which 
resulted in: 
 
• An 8% reduction in deposits during the final months of 2008; 
• A slow-down of bank lending as banks became more conservative in their approach towards asset 
liquidity; 
• A slow-down in the volume of remittances from migrant workers, which are a major contributor to 
Albania's stock of foreign currency, resulting in a depreciation of the lek with respect to the euro;  
and 
• A rapid deterioration of the loan portfolio, with an increase in non-performing loans.    
 
In response to these events, the Bank of Albania took action to strengthen supervision of the banking sector.  
This included a tightening of the monitoring of banks, issuing new regulations, and amending existing ones 
(see Chapter IV(4)(iii)).  The Bank also set new and add itional reporting requirements for banks, including the 
provision of stress tests on liquidity risk and additiona l information on loan portfolio quality, and measures 
taken by individual banks.  The amount of insured deposits was increased from lek 700,000 (€5,400) to 
lek 2.5 million (€19,250) per bank and depositor. 
 As at February 2010, the Bank of Albania was also working on a series of regulatory changes to further 
strengthen its monitoring capacities, and to increase the coverage of insured deposits. 
 Source: Bank of Albania. 
17. Albania has had a floating exchange rate regime  since 1992.  The system is a free float;  
interventions of the Bank of Albania are limited (by regulation) to situations of exchange rate 
misalignment with respect to economic fundame ntals to smoothen large short-term market 
fluctuations, and for foreign exchange accumulation.   There is no target for the exchange rate.  
Interventions must not interfere with the main m onetary policy goal of achieving price stability and 
hence must not conflict with the inflation target.  Th e exchange rate with respect to the euro remained 
relatively stable during 2004-08, but depreciated some what during 2009, affected by the effects of the 
global crisis. 
                                                      
9 IMF (2009). 
10 Bank of Albania (2009c). Albania WT/TPR/S/229/Rev.1 
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(5) BALANCE OF PAYMENTS  
18. Albania maintained a current account deficit ove r 2002-08.  While the level of this deficit 
fluctuated over 2002-06, showing no clear trends, it increased considerably in 2007 and 2008.  As a 
percentage of GDP, the current account deficit jumped from 5.7% in 2004 to 10.6% in 2007 and 
14.9% in 2008 (Table I.5).  This has been attribut ed to higher food and fuel import prices as well as an 
increase in imports related to the construction of ne w road infrastructure.  According to the IMF, 
underlying trends, however, are sounder:  the 2008 increase in the deficit was largely funded by 
revenue from privatization as well as loan disbur sements related to infrastructure expenditures.11  
Albania’s deficit on trade in goods was the main c ontributor to the current account deficit during the 
period, accounting for some 28% of GDP in 2008.12 
Table I.5 
Balance of payments, 2002-09 
(Million €, unless otherwise indicated) 
  2002 2003 2004 2005 2006 2007 2008 2009a 
Current account balance (% of GDP) -9.5 -6.9 -5.7 -8.9 -6.6 -10.6 -14.9 .. 
Current account (euro million) -448.6 -353.3 - 340.1 -589.0 -471. 6 -831.6 -1, 318.7 -1,034.6 
Merchandise trade balance -1,227.8 -1,181.3 -1,276.7 -1,476.7 -1,659.0 -2,104.1 -2,431.4 -1,674.6 
    Exports, f.o.b. 351.1 395.3 485.6 530.2 630.6 786.3 917.5 572.9 
    Imports, f.o.b. -1,578.9 -1,576.7 -1,762.3 -2,006.9 -2,289.6 -2,890.4 -3,348.9 -2,247.5 
Services balance -5.2 -73.1 -40.5 -140.4 -31.5 12.8 69.4 48.5 
    Credit 621.8 636.2 807.5 967.3 1,156.6 1,415.2 1,687.8 1,367.4 
    Debit -627.0 -709.4 -848.0 -1,107.7 -1,188.1 -1,402.4 -1,618.4 -1,318.9 
Income balance 116.3 132.0 138.0 131.2 207.8 216.8 106.4 -69.6 
    Credit 138.2 153.6 161.3 168.2 262.2 278.6 316.7 169.3 
    Debit -21.9 -21.6 -23.3 -37.0 -54.4 -61.8 -210.3 -238.9 
Net transfers 668.2 769.1 839.1 896.9 1,011.1 1,042.9 936.9 661.1 
    Private current transfers 627.5 715.9 778.4 835.5 968.5 982.7 905.5 639.7 
    Official current transfers 40.6 53.2 60.7 61.4 42.6 60.2 31.4 21.4 
Capital account 127.4 138.2 106.2 99.2 143.4 90.1 78.2 67.9 
Financial account 223.0 176.9 307.1 351.9 415.0 758.1 1,454.6 834.3 
Direct investment 141.4 156.9 267.4 209.3 250.3 470.0 590.6 565.3 
Portfolio investment -40.3 -20.6 4.6 -2.0 27.2 18.5 -69.2 1.9 
Other capital 116.4 30.6 25.5 135.2 131.7 264.2 938.3 273.8 
Errors and omissions 128.8 127.2 160.5 262.7 119.7 132.0 -22.2 187.1 
Overall balance 30.6 89.0 233.7 124.8 206.5 148.6 191.9 54.7 
Reserve assets -30.6 -89.0 -233.7 -124.8 -206.5 -148.6 -191.9 -54.7 
Use of fund credit and loans 5.5 10.0 9.6 9.4 5.8 5.5 -5.2 -6.7 
Memorandum         
Gross official reserves (US$) 838.8 1,025.5 1,374.2 1,425.1 1,795.7 2,138.4 2,370.2 .. 
Months of imports of goods and 
services 4.8 4.8 5.1 4.4 4.9 4.3 4.2 .. 
Public domestic debt (lek million) 260,752 280,767 295,200 327,353 348,935 369,536 396,004 409,501 
Public domestic debt (% of GDP) 41.9 40.5 39.3 40.2 39.6 38.1 37.6 .. 
Net public external debt (US$ million)
b 979.6 1,200.4 1,389.9 1,358.7 1,548.2 1,775.4 2,214.0 2,682.4 
Net public external debt (% of GDP) 22.0 21.1 19.0 16.7 17.2 16.7 17.1 20.8 
Total public debt (% of GDP) 63.9 61.6 58.3 56.9 56.8 54.8 56.0 56.8 
Debt service ratio/exports of goods and services .. 5.0 4.1 3.9 4.7 3.4 4.2 .. 
.. Not available. 
a Third quarter. 
b Includes both public and publicly guaranteed ex ternal debt.  IMF debt is not included. 
Source:  Bank of Albania online info rmation.  Viewed at:  h ttp://www.bankofalbania.org. 
                                                      
11 IMF (2009). 
12 Bank of Albania (2009b). WT/TPR/S/229/Rev.1 Trade Policy Review 
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19. Remittances not only represent a key source of household income and current expenditure 
financing, but have also been an important co ntributor to the Albanian balance of payments, 
mitigating the trade deficit by  an estimated 34% in 2008.13  Net current transfers totalled €937 million 
in 2008, of which €830 million were workers’ remitta nces.  Remittances have been affected by lower 
economic activity in Italy and Greece, declini ng by 12% in 2008 with respect to 2007.   
20. Despite sizeable remittance from abroad, Alba nia has a relatively large domestic savings-
investment gap, which reflects the fast pace of growth of the economy.  This has as a counterpart a sizable deficit in the cu rrent account of the balance of payments (foreign savings), which has been 
financed largely through direct investment and funds from multilateral donors, and allowed an 
increase in foreign exchange reserve s.  Gross reserves reached US$2.4 billion at year-end 2008, while 
net assets amounted to €1.7 billion, sufficient to c over 4.2 months of imports of goods and services.  
21. Albania's external debt remained below 20% of  GDP after 2004 and up to 2008.  With public 
domestic debt declining as a share of GDP, total pub lic debt has been below the Maastricht criteria for 
the Euro area (60%) since 2004, and is estimated to  have reached 56% of GDP  in 2008.  In 2009, 
domestic debt increased, and there was a tendency to shift away from short-term securities of up to 
one year to long-term securities, mainly with a five-y ear maturity term.  At the end of 2007, Albanian 
public debt denominated in national currency was traded in international financial markets for the first 
time. 
(6) D
EVELOPMENTS IN TRADE AND INVESTMENT  
(i) Developments in merchandise trade 
22. According to the United Nations Comtrade data base (Tables AI.1 through AI.4), Albania's 
total merchandise trade (imports plus exports a nd re-exports) increased at a nominal average annual 
rate of 24% over 2002-08 in U.S. dollar terms.  As a proportion of GDP, total trade increased from 38.7% in 2002 to 51% in 2008.  Exports (includi ng re-exports) represented on average just over 20% 
of total trade in 2008, while imports accounted for almost 80%.  
(a) Composition of trade 
23. In value terms (U.S. dollars), exports (incl uding re-exports) more than tripled between 2002 
and 2008, to reach US$1.36 billion (Table AI.1).  In 2008, Albania's main exports were:  clothing 
(25.9% of the value of total merchandise exports);  other consumer goods (principally footwear and 
parts thereof) (nearly 19.7%);  ores and other minera ls (mainly fuel) (12.1%);  and semi-manufactures 
(10.8%).  The strongest levels of growth over the period have been in certain non-ferrous base metals;  
petroleum;  and iron and steel.  The value of exports  of agricultural products as well as clothing and 
footwear have shown a declining trend (Table AI.1). 
24. The value of imports increased by 250% duri ng 2002-08, to reach US$5.25 billion.  In 2008, 
Albania's main imports were:  machinery and tran sport equipment (21.7% of the value of total 
merchandise imports in 2008);  food (16.4%);  fuel  (16%); and other semi-manufactured products 
                                                     
 
13 For several years, the Bank of Albania has been conducting quarterly survey s of remittance-recipient 
households.  The key results obtained from the 2008 surveys indicate that about 26% of Albanian households 
have family members working abroad as immigrants and 15% received remitt ances from these family members.  
Residents in rural areas receive 57% of total remittances ;  remittances account for 40 % of monthly income.  The 
annual average of remittances per household is €1,160.  Remittances originating in Italy and Greece acount for 
some 85% of the total value.  In 2008, around 50% of the money remitted was spent on the purchase of food and clothing (Bank of Albania, 2009b). Albania WT/TPR/S/229/Rev.1 
 Page 11 
 
 
(14.5%).  There was a significant increase in the valu e of imports of fuel over the period, reflecting 
mostly higher prices, as well as a slight decline in the value of food imports. 
(b) Direction of trade 
25. Italy is the destination for the largest share of Albanian merchandise expor ts (in value terms):  
some 62% in 2008.  Albania's other main trading partners are:  Serbia, Montenegro, and Kosovo 
(10%), and Greece (8%).  The share of trade with both Italy and Greece has shown a generally declining trend.  The greatest increase in export sh are has been with Serbia, Montenegro, and Kosovo.  
Albania has begun to export to new markets, including to China and the Russian Federation (Table AI.3). 
26. Italy is also Albania's main source of merchandise imports, accounting for some 27% of the 
total value in 2008.  Other main sources of imports ar e:  Greece (15%);  China (7%);  Germany (6%);  
Turkey (6%);  and Serbia, Montenegro, and Koso vo (5%).  The share of imports from Italy and 
Greece has declined steadily, wh ile the share of imports from Serbia, Montenegro and Kosovo and 
China has increased. 
(ii) Trade in services 
27. Trade in services has been dynami c in the past few years, in creasing by an annual average 
rate of 14% in euros and of 26% in U.S. dolla rs between 2002 and 2008, exceeding the growth rates 
of trade in goods.  Exports of services accounted fo r 65% of total exports of goods and services in 
2008, while services imports were 33% of total impor ts.  Albania's balance of trade in services has 
shown a surplus since 2007;  this surplus reached €69.4 million in 2008, equivalent to 0.8% of GDP, 
mainly on account of a higher surplus in travel, whic h entirely offset the deficit in transportation and 
insurance services.   
28. Travel services are the main earner of forei gn currency for Albania, having generated some 
€1.2 billion in 2008, and resulting in a trade surplus of some €112 million, up from €80 million in 2007 (Table I.6).  Exports of travel services acc ounted for almost 70% of services exports in 2008, 
and almost two thirds of imports.  Albania is a ne t importer of transport and insurance services, which 
posted a deficit of €173 million in  2008, and accounted for some 9%  of exports of services and 20% 
of imports.  The authorities expect the deficit in freig ht services to moderate in the future owing to an 
upgrade of infrastructure, and the liberalization a nd expansion of trade exchanges with countries in 
the region.  The category "other services", account ed for 22% of exports and 15% of imports of 
services in 2008, yielding a €130 million trade surplus.
14 
Table I.6 
Trade in services, 2004-08 
(€ million) 
Description 2004 2005 2006 2007 2008 
Balance -40.5 -140.4 -31.5 12.9 69.4 
Revenue 807.5 967.3 1,156.6 1,415.2 1,687.8 
Transport 78.9 102.3 91.5 115.2 143.9 
  of which Freight 52.0 58.9 30.1 45.9 51.4 
Travel 591.5 691.5 804.5 1,101.5 1,169.6 
 
   Table I.6 (cont'd) 
 
                                                      
14 Other services comprise:  comm unication services, which accounted fo r 6.1% of services exports in 
2008, and 3.4% of imports;  construction services (1% and 0.2%), computer and information services (0.8% and 
1%), government services (2.4% and 0.8%), financial services (2.8% and 1.3%), cultural recreational and 
personal services (0.5% and 1.7%), and other business services (8.5% and 6.5%).   WT/TPR/S/229/Rev.1 Trade Policy Review 
Page 12 
 
 
Description 2004 2005 2006 2007 2008 
Insurance 5.3 4.6 2.9 5.0 3.6 
Other services 131.9 168.9 257.6 293.4 370.1 
  Communications 60.2 57.6 42.0 49.4 102.7 
  Construction 2.7 2.2 1.8 5.6 16.3 
  Computer and Information services 0.5 2.5 1.0 2.0 12.8 
  Government services 5.0 8.5 18.5 16.1 39.9 
  Financial services 8.8 12.8 20.2 30.6 46.7 
  Personal, cultural and recreational services 18.9 12.9 20.4 60.9 9.1 
  Other business services 35.8 72.3 153.8 128.7 143.3 
Expenditure 848.0 1,107.7 1,188.1 1,402.3 1,618.3 
Transport 163.8 183.8 125.3 178.4 238.6 
  of which Freight 124.1 140.8 89.0 146.3 170.0 
Travel 516.5 635.3 767.7 922.6 1,057.5 
Insurance 21.0 24,7 28.5 47.5 81.7 
Other services 146.8 263.9 266.6 253.8 240.6 
  Communications 16.8 11.8 5.9 4.3 54.7 
  Construction 2.7 2.2 1.8 5.6 16.3 
  Computer and Information services 1.3 2.7 2.7 11.1 15.5 
   Government services 50.9 52.9 26.1 23.8 13.1 
  Financial services 4.3 14.1 16.1 18.3 20.6 
  Personal, cultural and recreational services 29.2 89.9 70.9 53.2 27.1 
  Other business services 43.7 91.2 143.4 122.9 105.8 
Source : Bank of Albania. 
 
(iii) Foreign direct investment 
29. Foreign direct investment in 2008 totalled €67 5 million, up by 40% from 2007.  Some 19% of 
foreign investment inflows in 2008 entered in the fo rm of privatizations of state-owned enterprises, 
while the rest represents increased capital in exis ting foreign investments, and new investments.  
Around 27% of foreign investment flows in 2008 were allocated to the banking sector, 44% to 
manufacturing activities, and 2% to telecommunicati ons.  Total direct investment inflows from 2002 
to the third quarter of 2009 period reached €2.65 bill ion.  Foreign investment flows originated mainly 
from EU countries, particularly Greece and Italy. 
(7) OUTLOOK  
30. The IMF is forecasting growth of 2.2% in 2010, with a moderate inflation rate of 2%.  The 
Albanian authorities also expect growth to be m oderate, at about 3-3.5%, particularly due to the 
weakness of external demand.  In the medium run,  the authorities consider that constant structural 
reforms in the economy further promote growth and that investing in infrastructure should be a 
priority.  The Bank of Albania deems that liquidity , internal and external balances in the economy, 
and financial soundness could c onstitute challenges to macroeconomic stability and long-term 
development, and that policies should be orient ed towards obtaining macroeconomic balances, 
namely price stability, low volatility of monetary indi cators, a robust and efficient financial system, as 
well as sound public and private sector balance sheets.  The authorities consider this key to attracting 
the necessary foreign investment and cutting the cost of borrowing from international markets.  The 
authorities also consider that sustained long-term growth will require the completion and expansion of 
private pension schemes, further investment in hea lth and education, and enhancing the managerial 
capacity of the private sector.15  Sustained future growth will also hinge on overcoming bottlenecks in 
certain sectors, particularly electricity, where shortages have to some extent limited growth (Annex I.1).
                                                     
 
 15 Bank of Albania (2009e). Albania WT/TPR/S/229/Rev.1 
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ANNEX I.1 
1. One of the key infrastructural challenges facing Albania has been to develop a more efficient 
and reliable power system.  Over the past two decad es energy consumption in the country has nearly 
doubled with households accounting for the highest growth in electricity usage.1  This trend has 
largely been fuelled by below-cost tariffs as well as  high levels of electricity theft, non-payment of 
bills, and technical losses on the network.2  On the supply side, until recently, there have been few 
investments to develop and diversify Albania's infrastructure to generate energy, which is 
predominantly based on hydro-electric power and vul nerable to drought cond itions.  In addition, 
Albania's capacity to import electricity has been hampered by the physical limitations of the 
transmission system.  The result has been frequent power-outages:  over 2002-07 these averaged 
between 1.6 hours and 4.3 hours per day.  A significant increase in the cost of imported electricity and 
the closure of a plant in Bulgaria have added to the already difficult situation (Table I.1).  The IMF 
has described the problems affecting th e sector as chronic and longstanding.3  The authorities 
indicated that the costs of electricity losses were not covered by the Government. 
Table I.1 
Energy consumption, 2002-08   
 2002 2003 2004 2005 2006 2007 2008 
Generation (GWh) 3,204 4,974 5,467 5,409 5,516 2,933 3,770 
Import (GWh) 2,072 937 567 365 633 2,828 2,417 
Average import price (Euro/MWh) 30 30 36 40 48 69 79 
Power outages (hours per day) 4.3 2.9 2.3 2.7 1.6 3.4 0.3 
Source:  Energy Regulator of Albania (2008), Annual Report 2008 .  Viewed at:  http://www.ere.gov.al/doc1/raporti_dudaj_ 
 2008_eng.pdf. 
 
2. Until 2008, all energy operations from production to supply were in the hands of a single 
state-owned company, the National Electroenergetic Corporation (KESH).  As set out in the National 
Energy Strategy (2003), the Government's aim has been to restructure the sector along market 
economy principles.4  New laws governing the sector were en acted during the review period and the 
distribution arm of the KESH has been privatized (Chapt er III(4)(iii)).  It is hoped that this will help to 
address the key problem of electricity theft.   In addition, the Government is seeking to diversify 
energy sources and open the sector up to private in vestment.  In 2009, the European Commission's 
overall assessment of developments in the sector, ho wever were that progress has been made but the 
sector remains weak and the security of energy supply is still uncertain.5 
3. The objectives of a Power Sector Law, adopted  in 2003, include:  the restructuring, 
commercialization and ultimate privatization of the KESH, and the development of a competitive 
energy market;  the encouragement of regional electri city trade;  and the improvement of investment 
conditions in the electricity sector.6  The Power Sector Law, inter alia , gives authority to the Energy 
Regulatory Entity (ERE) to grant licences for:  gene ration, transmission, distribution, wholesale or 
                                                      
1 Energy consumption has grown from 3304GWh in 1988 to 6300GWh in 2008.  In 2008, household 
customers accounted for 56% of gene ral billed consumption, and the pr ivate sector (including industry, 
agriculture, services et c) accounted for 32%. 
2 According to the EBRD these lo sses were as high as 35% in 2007.  EBRD online information.  
Viewed at:  http://ebrdrenewables.com/site s/renew/countries/Albania/profile.aspx. 
3 IMF (2009). 
 4 National Energy Strategy and Plan of Action 2003, as updated in 2005.  Viewed at:  
http://unfcc.int/files/meetings/seminar/appl ication/pdf/sem_albania_sup1.pdf.    
 5 European Commission (2009a). 
6 Law No. 9,072 of 2 May 2003.  Viewed at:  http://www.ere.gov.al/doc1/lan_on_power_sector_26.06. 
09.pdf. WT/TPR/S/229/Rev.1 Trade Policy Review 
Page 14 
 
 
retail supply, trade, and import of electric power.  It also stipulates that tariffs are to be set on a 
cost-recovery basis.  This replaces the previous methodology which favoured residential customers.  
However, in 2009, the European Commission noted th at the electricity pri ce was not yet at cost 
recovery levels.7   
4. In addition, with a view to re-establishing a national market for natural gas and competitive 
gas projects, a Natural Gas Sector  law was adopted in 2008.  Its objective is to create the legal 
framework to develop and regulate all natural gas activities, with the exception of exploration and 
production.8    
5. Albania has also been seeking investment in the energy sector to improve the security of 
supply.  To this end, it has been offering concessi ons for the construction an d operation of small and 
medium hydro-power plants9, as well as opportunities for investme nt in wind, solar, and biomass 
energy.10  The authorities indicated that 83 concessionary  contracts have been signed, with a total 
installed capacity of 612 MWh.  A number of investme nt projects have been developed, including the 
construction of the Vlora Combined Cylce Power Plant (97 MW, co-financed by the World Bank);  the Energy Park of Lezha (wind energy, 234 MW);  and the Wind Park of Vlora (500 MW, for an 
estimated investment of €750 million);  the Asht a Hydro Power Plant (48 MW, €166 million);  and 
the Devall Cascade Project (319 MW, €1 billion).  Th ere are also two projects for the construction of 
interconnection lines, and one for a new overhead transmission line. 
                                                     
 
 7 European Commission (2009a). 
8 Law No. 9,946 of 30 June 2009.  Viewed at:  http://www.ere.gov.al/doc1/ Albanian_Gas_Law_No. 
9946_dt..063008_English.doc.  The natural gas activ ities to which this law applies are:  production, 
transmission, distribution, storage, supply and consumption of natural gas, and the construction and operation of natural gas infrastructure. 
9 These are 35-year BOT concessions,  with a state guarantee to purcha se energy for 10 to 15 years at 
market prices.   
10 Albinvest online information.  View ed at:  http://www.albinvest.gov.al.