Albania has enjoyed preferential access to the European Union market for years, but has failed to use it to develop a competitive manufacturing industry and sustainably increase exports of goods.
While 72.5% of Albanian exports of goods are directed to EU countries, the processing industry is losing weight in the economy and its exports have fallen for the third consecutive year.
The European Commission's 2026 Progress Report highlights that Albania has a high level of trade integration with the EU, but economic benefits have been limited by low productivity, lack of innovation, and the concentration of production in activities with limited added value.
The Stabilisation and Association Agreement, which entered into force in 2009, has enabled Albania to trade without customs duties on most goods with the EU. Trade liberalisation had begun even earlier, giving Albanian businesses the opportunity to sell their products in one of the largest markets with the highest purchasing power in the world.
However, market access has not been accompanied by a similar transformation of the country's production structure, the progress report notes. In 2025, the share of industry in GDP fell to 10.1%, while manufacturing represented only 6.5%. In contrast, construction increased its share to 12.6% of GDP, from 11.9% a year earlier.
This structure of the economy reflects an increasing orientation of activity towards sectors that rely mainly on domestic demand, real estate and services, while manufacturing activities oriented towards international markets are facing increasing difficulties.
The European Commission assesses that the decline in manufacturing industry exports for three consecutive years does not constitute just a cyclical development, related to the temporary weakening of demand, but signals deeper structural problems in the Albanian economy.
A significant portion of Albanian production remains focused on activities that rely on relatively low labor costs, rather than technology, innovation, and high value-added products. This model has become increasingly uncompetitive in the face of rising wages and a strengthening local currency.
According to the Commission, the appreciation of the lek and the increase in labor costs have damaged the price competitiveness of Albanian products in foreign markets. The impact has been particularly strong in the textile and footwear industry, where a large part of production is carried out for European customers.
The strengthening of the lek reduces revenues in the local currency for companies that invoice in euros, while payroll expenses and part of operating costs continue to be paid in lek. For enterprises with low profit margins, this makes it difficult to maintain competitiveness and finance new investments. The report highlights that low productivity, limited capacities for innovation and the weak participation of Albanian businesses in high-value segments of European production chains are limiting the potential for Albania's economic convergence with the EU.
Instead of trade integration being accompanied by the expansion of industries producing for the European market, the Albanian economy is increasingly relying on service exports.
According to the European Commission, exports of services, especially those related to travel and tourism, doubled between 2019 and 2024 and now represent around 80% of the country's total exports. But this positive performance has coexisted with a weakening of goods exports. As a result, Albania is increasingly achieving international economic integration through tourism and services, while industrial production is not able to benefit to the same extent from the opportunities offered by the European market.
Even the approximation of goods standards with the EU has stalled.
Beyond the weaknesses of the manufacturing sector, Albania continues to have problems in preparing for full functioning within the European single market. In Chapter 1, which relates to the free movement of goods, the European Commission assesses that Albania has not made progress in the approximation of legislation during the reporting period.
Legislation on accreditation, conformity assessment and market surveillance remains only partially aligned with European standards.
In September 2025, the request of the General Directorate of Standardization for full membership in the European organizations CEN and CENELEC was rejected, as the legislation harmonized with the EU was not fully in force and was not effectively implemented.
Market surveillance capacities also remain limited. The State Inspectorate for Market Surveillance carried out 895 inspections during the reporting period, around 400 fewer than in the previous period. Approximation of technical standards, safety and quality of products is important for the ability of Albanian businesses to compete in the European market. Preferential access in terms of customs does not exempt products from the obligation to meet the relevant technical and regulatory requirements of the EU.
In 2025, the EU represented 57% of Albania's total trade in goods, absorbing 72.5% of exports and supplying 51% of imports.
Despite this high level of trade integration, the Albanian economy has not yet managed to build a production base that can sustainably benefit from the size and opportunities of the European market, notes the Progress Report./Monitor.al/
