Albania's economy is expected to grow by 3.1% in 2024, slowing down from 3.3% expansion last year, the International Monetary Fund (IMF) said on Thursday, decreasing its October forecast for 2024 by 0.2 percentage points (pp).

In 2025, Albania's gross domestic product (GDP) will increase by 3.4%, the IMF said in the April 2024 edition of its World Economic Outlook report published on Tuesday.

For the year 2023, the country's economic growth marked an annual increase of 3.44%, according to INSTAT's preliminary estimates. Compared to 2022, when GDP grew by 4.85%, there was a slowdown. Construction, real estate, and public administration have been the biggest contributors to growth in 2023, while industry and agriculture showed a negative trend.

Although Albania recorded the best tourism year in 2023, with more than 10 million foreign nationals entering the country, consumption was quite weak. Population consumption grew by just 2.96% in 2023, from 7.37% the previous year, marking the lowest levels since the pandemic. Albania is thus ranked among the countries that will have the lowest economic growth in the region in 2024, the fourth out of six countries in the Western Balkans.

Kosovo is expected to have the highest growth, with 3.8%. Also for Kosovo, the IMF has made a slight downward revision, from the 4% that was the estimate in October. Montenegro is expected to have a growth of 3.7%, the same as in October.

The most sensitive upward revision is for Serbia, which is now expected to expand by 3.5%, from the 3% that was the initial estimate.

For North Macedonia, an increase of 2.7% (0.2 percentage points more) is expected, and for Bosnia-Herzegovina, the strongest downward revision has been made, from 3% to 2.4%.

Average consumer price inflation in Albania is forecast to abate to 3.5% in 2024 and 3% in 2025, from 4.8% last year, the IMF said. The country is projected to close in 2024 with a current account deficit of 3.8% of GDP, a tad higher compared to 3.7% in 2023.

The IMF also said it expects the economy of the Emerging and Developing Europe area will expand by 3.1% in 2024, increasing its October forecast by 0.9 pp. The economic output of the region grew by an estimated 3.2% last year.

The baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies-where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025-will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forecast for global growth five years from now-at 3.1 percent-is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging markets and developing economies. Core inflation is generally projected to decline more gradually.

The global economy has been surprisingly resilient, despite significant central bank interest rate hikes to restore price stability. Chapter 2 explains that changes in mortgage and housing markets over the pre pandemic decade of low interest rates moderated the near-term impact of policy rate hikes. Chapter 3 focuses on medium-term prospects and shows that the lower predicted growth in output per person stems, notably, from persistent structural frictions preventing capital and labor from moving to productive firms. Chapter 4 further indicates how dimmer prospects for growth in China and other large emerging market economies will weigh on trading partners.