The Albanian economy will grow by 4% this year, according to the Vienna Institute for International Studies (WIIW) in its autumn report. While for the next year, the local economy is expected to expand by 3.8% and 3.9% in 2026.

"Economic growth is expected to reach 4% in 2024. Inflation remains low and stable. However, vigilance is required, as the demand for real estate loans is increasing rapidly. The overvaluation of the currency has damaged the export of goods,” the report noted.

“The growth of tourism is continuing, but this will not prevent the further expansion of the current account deficit. Foreign Direct Investment (FDI) inflows will remain high, with the energy and manufacturing sectors benefiting the most," the report states.

Despite the uncertain international environment, the economies of most countries in Central, East, and Southeast Europe are showing robust growth. However, some of those countries with strong ties to German industry – such as Czechia, Slovakia, and Hungary, as well as Romania – are badly feeling the pinch of the recession in Germany.

Nevertheless, their economies are likely to pick up again next year. This is the finding of the new Autumn Forecast by the Vienna Institute for International Economic Studies (WIIW), which covers 23 countries in the region. “The main driver of growth in the EU member states of Central and Eastern Europe has been and remains private consumption, due to sharply rising real wages; meanwhile, industry is in recession,” explains Richard Grieveson, Deputy Director of WIIW and lead author of the Autumn Forecast.

However, there is an in-built delay before this slump in production is felt, so further difficulties are to be expected. Overall, WIIW is forecasting average growth in 2024 of 2.2% for the region’s EU member states, a downward revision of 0.4 percentage points on the Summer Forecast, with growth expected to pick up to 2.9% in 2025. Even so, both this year and next the EU member states of Central and Eastern Europe are still set to significantly outperform the euro area (which will see growth of 0.6% in 2024 and 1.4% in 2025) and thus continue the economic catch-up process.

The biggest risks to the forecast are geopolitical. “If there were to be a direct war between Israel and Iran, it would have a catastrophic impact on the global economy, and therefore on the region,” says Richard Grieveson. “Oil prices would likely skyrocket, and global trade, along with many supply chains, could also suffer massively.’ Another risk is the possible return of Donald Trump to the US presidency. This eventuality carries with it numerous uncertainties, as the US could intensify its trade war with China and possibly initiate one against the EU.

In this context, WIIW has analyzed the recently much-discussed topic of near-shoring. “Apart from Hungary, near-shoring has so far mainly taken place in Bosnia and Herzegovina, Kosovo, and North Macedonia. There are also a few examples in Albania and Serbia. Elsewhere, the omnipresent labor shortage is probably also standing in its way,” says Branimir Jovanovic, Economist at WIIW and co-author of the Autumn Forecast.