The World Bank said on Tuesday it expects Albania’s Gross Domestic Product (GDP) growth to slow to 3.7% in 2025, from 4% in 2024, raising its June forecast by 0.5 percentage points (pp).

The World Bank also projects that Albania’s GDP will grow by 3.5% in 2026, raising its previous projection by 0.4 pp, it said in its Western Balkans Regular Economic Report.

With a rise in employment, low inflation, and lower public debt, the implementation of reforms is needed to support Albania's expected economic growth.

"Key priorities include fiscal stability, green development, better social protection, improved digital services, and stronger ties with regional and EU markets," Massimiliano Paolucci, World Bank Group Country Manager for Albania, was quoted as saying.

Labor-market conditions improved, unemployment edged down, and employment rose. Service sector hiring offset job losses in agriculture in the first quarter of 2025, lowering the unemployment rate to 8.7% and lifting the employment rate (ages 15–64) to 69.5% for both men and women. Despite rising wage pressures, inflation stayed low at 2.2 percent over the first seven months of 2025, supported by a stronger lek and low Eurozone inflation.

In the first half of 2025, fiscal policy supported demand through moderate loosening, with the overall fiscal surplus narrowing to 2.7% of GDP from 4.3% percent a year earlier.

Looking ahead, Albania’s economic growth is projected to moderate to 3.7% in 2025 and 3.5% in the medium term, amid global trade uncertainties and a shifting international outlook, but faster implementation of EU-backed reforms could significantly lift per capita income growth by up to 3.1 percent above the baseline and accelerate convergence with EU living standards.

In the Western Balkans, the World Bank foresees economic growth slowing down to 3% in 2025, from 3.6% in 2024, due to a continued weak external environment combined with higher domestic pressures.

A modest Euro-area recovery should help to support improved regional growth by boosting investment and supporting exports, though at a lower rate than in recent years, with a full rebound expected only in 2027.

The EU Growth Plan offers a strategic path for the Western Balkans to overcome structural barriers and boost long-term growth through continued reform efforts in five key areas: digital infrastructure; regulatory quality; government effectiveness; financial development; and female labor force participation.

The spotlight of this edition of the Western Balkans Regular Economic Report focuses on the jobs challenge. The region faces a labor market paradox — labor shortages coexist with persistently high unemployment (above 10 percent), and relatively low labor force participation (below 55 percent), especially for women, youth, and the elderly.