The European Bank for Reconstruction and Development (EBRD) said on Thursday it has maintained its forecast from February for Albania's economic growth in 2026 at 3.5%, amid record tourism revenues and strong remittances.

Real economic growth ticked down to 3.7% in the first quarter of 2026, from 3.8% in full year 2025, the EBRD said in its latest Regional Economic Prospects report. Growth in the first quarter was driven by public administration, real estate and construction.

Industry and agriculture, on the other hand, contracted as the Lek currency appreciation, rising wages and weak external demand hindered competitiveness. "The 0.1 percentage point upward revision for 2026 since June reflects EU accession-related reforms and investment. Competitiveness pressures, climate risks and energy-price volatility linked to the conflict in the Middle East are the main downside risks," the EBRD said.

In a regional perspective, EBRD projects economic growth in Western Balkan countries to average 3% in 2026, after a 5% average in 2025, supported by improving external demand, stronger investment activity and tourism.

Growth in the economies where EBRD invests, is expected to slow to 2.5 per cent in 2026, before picking up to 4.0 per cent in 2027, according to the Bank’s latest Regional Economic Prospects.

The 2026 growth forecast has been revised down by 0.6 percentage points relative to the previous forecast published in June, while the 2027 outlook has been revised up by 0.4 percentage points.

The revisions largely reflect a deep recession in Iraq where oil exports have collapsed, followed by an expected rebound once oil shipments normalise. Excluding Iraq, this year’s forecast has been revised down by 0.1 percentage point, reflecting tighter financing conditions, the impact of drought in Europe and the Black Sea shipping blockade, while the outlook for 2027 is unchanged.

The report, entitled “Running dry”, highlights growing constraints in three key areas: oil exports, water and global savings. Together, these pressures are exposing vulnerabilities in energy systems, food supply chains and financing conditions across the EBRD regions.

Oil prices climbed from around US Dollar 65 a barrel before the conflict in the Middle East to more than US Dollar 100 by April 2026, as seaborne crude exports from the region halved. Prices remain 30 to 60 per cent above their pre-conflict level. Refined products, particularly diesel and jet fuel, have seen larger price increases than crude.

Average inflation in the EBRD regions has stabilized at around 6 per cent after reaching 6.7 per cent in April. Energy accounts for around a quarter of headline inflation, with limited pass-through to other components. Inflation remains around two percentage points above its pre-Covid average and is increasingly feeding into higher inflation expectations.