Low productivity remains one of the main obstacles to Albania's economic convergence with the European Union. According to the latest analysis by the International Monetary Fund (IMF), Albania's Gross Domestic Product per capita continues to lag significantly behind most Central, Eastern and Southeastern European (CESEE) countries, mainly due to weak labor productivity.
Data show that output per hour worked is well below the EU average and has shown limited improvement over the last decade. In the absence of a decisive policy response, the outlook looks challenging, especially as EU integration is expected to accelerate emigration and deepen labour market shortages.
Migration and the labor market: a fragile balance
The IMF notes that the decline in the working-age population has helped bring labor market participation rates closer to those of the EU, but structural problems remain deep. Informality remains above the EU and Western Balkans average, while the rate of young people not in employment, education or training (NEET) remains worrying.
According to data from the OeNB Euro Survey 2024, Albania ranks among the countries with the highest percentage of citizens expressing willingness to emigrate in the next 10 years. The main factors are employment and higher living standards abroad, reinforced by the very large wage gap with EU countries, especially for highly educated workers.
Economy oriented towards low productivity sectors
One of the structural developments that is holding back productivity growth is the gradual shift of the workforce towards the tourism and services sectors, which, although they generate employment, have lower productivity compared to the manufacturing industry.
At the same time, research and development (R&D) spending remains minimal, while investments in technology and innovation are insufficient to boost high-value-added production. The IMF emphasizes that this situation becomes even more problematic in the context of gradual exchange rate appreciation and wage increases, which are eroding the competitiveness of low-value production.
Education and skills: a weak link
The report highlights deep gaps in the education and vocational training system. Participation in lifelong learning is low, while Albanian students' scores on PISA tests are below the EU and Western Balkans average.
Vocational schools are present in only 20 out of 61 municipalities, while business involvement in vocational education remains lower than expected. These factors limit the economy's ability to create quality jobs and retain human capital in the country.
NEET youth and active employment policies
Another structural problem is the high rate of NEET youth. In 2023, about half of them were not looking for work at all and less than 20% were registered with the National Employment and Skills Agency (NESA).
Although Albania has undertaken active labor market policies – such as career guidance and employment subsidies for vulnerable groups – coverage remains very limited. Only 3.5% of the registered unemployed benefited from employment promotion programs in 2024, while the effectiveness of mediation is declining, with job placements halved compared to 2023.
What does the IMF recommend?
According to the IMF, continued increases in the minimum wage cannot replace structural reforms and risk being unsustainable without real productivity gains. The international institution recommends a broad package of reforms, including:
expanding and better targeting active employment policies, especially in rural areas and for informal workers;
strengthening education, especially in STEM, teacher training and full implementation of the dual vocational education system;
measures to reduce informality and increase labor market participation, including improving childcare services;
support for innovation, digitalization and improvement of the business climate;
strengthening governance, the rule of law and the independence of oversight institutions, as key factors for maintaining human capital in the country.
EU integration requires a more productive economy
The IMF's message is clear: European integration offers great opportunities for Albania, but without sustainable productivity growth, the benefits risk being limited and accompanied by social costs, including continued emigration of young people and professionals.
In this context, productivity is not just an economic indicator, but a fundamental condition for the long-term success of Albania's integration into the European Union. /ekofin.al
