Current Situation
Albania continues to achieve impressive economic growth, largely because of strong macroeconomic performance and tremendous remittances which amounted to 933 million Euros or 12.8 percent of the GDP. Gross domestic product (GDP) grew by about 5 percent in 2006 despite the slowdown in construction and the adverse effect of the continued electricity supply shortage. GDP per capita increased from $2,619 in 2005 to over $2,855 in 2006. The average inflation rate was 2.5 percent and the overall budget deficit was reduced to 3 percent of GDP. According to the Living Standard and Measurement Survey in 2005, the poverty in Albania was reduced to 18.5 percent  from 25.4 percent of the population in 2002.

While these accomplishments are impressive, Albania remains one of the poorest countries in Europe and its per capita income is among the lowest in the Balkan region. Worldwide it ranks 65th of 177 countries on the Human Development Index (UNDP’s 2004 Human Development Report). The average unemployment rate is 14.2 percent with much higher rates in the rural areas. Foreign direct investment (FDI) in 2006 is 260 million Euros, placing Albania among the lowest recipients of foreign direct investment in the region. Although the annual growth rate of exports (18 percent) was higher than that of imports (15 percent), trade deficit continues to widen, reaching $2.259 billion in 2006 and exceeding the previous year’s deficit by 16 percent.

Currently the private sector contributes more than 75 percent of the GDP and more than 62 percent of all employment. Micro, small and medium enterprises are the driving force for Albania’s economic growth and job creation. They account for 99.5 percent of private enterprises and about 75 percent of total employment in non-agricultural sector. However, the development of micro, small and medium enterprises has been hindered by their weak competitive capacity, their limited access to commercial credit and the unfavorable business environment caused by widespread corruption, unfair competition, high cost of business registration and inconsistent application of fiscal laws and regulations. In addition, poor infrastructure (energy, communication and transportation), disputable property ownership, and weak rule of law discourage domestic and foreign investments. According to the World Economic Forum’s Global Competitiveness Report 2006-2007, Albania ranks behind most other countries in the region for both the Growth Competitiveness Index and Business Competitiveness Index.

USAID’s Economic Growth program promotes sustainable economic growth. It aims to address the constraints to private enterprise development, decrease trade deficit, increase FDI, create employment, and reduce poverty. USAID will achieve the program objective through strengthening the competitive capacity of private enterprises; increasing the access of micro and small and medium enterprises to credit; and fostering a policy environment that enhances business development, trade and private investment.

Program Focus

• Improve Economic Policy and Business Environment
• Improve Private Sector Competitiveness in both agricultural and non-agricultural sectors
• Strengthen the Financial Services Sector and Increase Access to Capital
• Expand and Improve Access to Economic and Social infrastructure

Key Accomplishments

Improved Private Sector Competitiveness

• In FY 2006, over 13,000 private enterprises have benefited directly from USAID’s assistance in improving their technical, managerial and marketing capacity and increasing access to financial resources for the expansion of their business.

Strengthened the Financial Service Sector and Increase Access to Capital

• Ninety three loans were provided to participating small and medium enterprises for a value of $3.86 million by commercial bank
• USAID-assisted enterprises received about 9,800 loans with a total valued of $27.44 million from non-bank financial institutions and organizations in 2004.  Over 10 percent of the loans reached the minority Roma (Gypsy) community. The repayment rate was over 98 percent.
• Bank deposit increased by 23 percent to $4.55 billion in FY 2006, indicating the growing confidence of the public in the banking system, partially because of USAID’s effort to strengthen the operational and supervisory capacity of the Bank of Albania.

Improved Economic Policy and Business Environment

• The Albanian American Enterprise Fund (AAEF) supported Albania’s aviation sector through a joint venture with the Tirana Airport Partners consortium. In October 2004 the consortium, of which the AAEF holds 21.3 percent of shares, signed an $83 million agreement with the Government of Albania to modernize and operate the Tirana (Rinas) Mother Teresa International Airport. The agreement serves as a strong inducement for other foreign investors to take part in the privatization of the country’s strategic sectors. The new terminal has been in operation since early 2007.