The Balkan state is enjoying a boom in tourism and exports, but faces challenges such as poverty, organized crime and the sharp appreciation of the lek
Almost four decades after the death of Enver Hoxha, the tyrant who turned Albania into one of the most isolated countries in Europe, tourism has experienced very rapid growth in the last few months. The number of nights spent by foreign visitors in May was 2.5 times that of the same month in 2019. According to information from Eurostat, this figure is no surprise: the small Balkan nation has far surpassed its pre-pandemic figures since the fall of 2021, while leading tourism destinations such as France and Italy have not yet managed to return their previous levels.
Albania offers affordable prices, crystal-clear waters and exoticism without having to leave Europe. These are the foundations of the digital marketing campaign that has attracted thousands of people this summer to a country with a population of 2.8 million that has had to recruit more workers from India, Bangladesh and Pakistan, among other countries, to meet the increase in demand. “Out of the five hotels we have stayed at, four opened last year and one this year,” says Marcos Fernández, a high school teacher from Madrid, Spain who visited Albania in August. “The whole country is under construction.”
Albania registered a 45% year-on-year increase in the number of building permits in 2021, reflecting an upward trend that, according to government data, was sustained in 2022 by the hotel sector, which registered a 55% rise in business. On top of the tourism surge and the construction work that followed the 2019 earthquake, the building boom is also due to the remittances sent by the sizeable diaspora of 1.2 million Albanians abroad, which accounts for more than 9% of the country’s GDP, according to the World Bank’s estimations.
In addition to legal remittances, funds stemming from criminal activities flow into construction, says Islam Jusufi, a professor of political science at Epoka University. “A significant part of the skyscrapers being built in Tirana and other cities is being acquired by people whose revenue comes from organized crime,” he explains. Albanian criminals expanded the original business of illegally exporting cannabis, says Jusufi, and have begun to run international drug trafficking networks involving Latin American countries.
Fortunately, organized crime figures appear to be starting to wane in terms of their importance to the national economy. According to Jusufi, this is partly the result of judicial reforms requested by the United States and the European Union that removed a substantial number of judges whose impartiality was difficult to ascertain. He adds that there also is a new awareness among members of the governing Socialist Party: “There are already signs of progress, such as the imprisonment of a former interior minister who had been associated with one of these criminal groups.”
“I do not believe that any economic benefit stems from organized crime,” replies Isilda Mara when asked about the effects that an anti-crime campaign may have on the real estate sector. “The negative effects that it [organized crime] generates on the economy, on the free market, on competitiveness, on corruption and on the malfunctioning of the judicial system and law and order are very significant,” she explains by email from Vienna, where she serves as the Albania specialist at the Institute for International Economic Studies.
In Albania, agriculture has traditionally represented the main source of employment, but it has now also become a generator of foreign exchange. Although family micro-farming still predominates in a country that was self-sufficient in the 1980s, productivity has increased at the same rate as exports, with growth in 2022 of 15.6% for foreign sales of melons, watermelons, tomatoes, cucumbers and citrus fruits, among other crops.
“Agricultural export data had started to pick up before the pandemic, in 2017 and 2018; it then recovered in 2022 and it has done particularly well in 2023,” says Meleq Hoxhaj, an independent researcher and co-author of a research paper on the link between globalization and unemployment in Albania. According to Hoxhaj (who is no relation to the late dictator), the job losses that might have resulted from the rapid mechanization of the Albanian countryside have been made up for by the increase in exports.
“Albania was at the bottom of Europe and Central Asia in terms of poverty levels, and in 30 years it has attained an upper-middle income level with virtually all indicators moving in the right direction,” says Emanuel Salinas, World Bank representative in Tirana. “Poverty has been steadily declining and GDP has been growing rapidly,” he adds. You do not need to go back to the 1990s to attest to the progress. Between 2010 and 2019, GDP per capita grew at an average annual rate of 2.9%, according to the World Bank. In a mere seven years, poverty has shifted from affecting 41.5% of the population (2016) to 23.9% (2023).
Eliminating this figure is not the country’s only outstanding challenge. Albania now faces a problem that countries like Argentina or Venezuela could only dream of, namely the upward pressure on the local currency generated by the massive inflow of foreign currency through foreign investment, remittances, tourism and agricultural exports. From the 135 leks needed to acquire one euro a decade ago, in recent years it had moved to a range of 120 leks per euro. This barrier was broken again in July 2023, when the Albanian currency appreciated to 101 leks per euro. “In order to alleviate this pressure, the Bank of Albania has been withdrawing euros from the market, but this has not been enough. Although the strong appreciation of the lek has reversed a little, it is still a huge burden for exporting companies, which, as an incentive, have obtained some tax refunds from the government,” explains Hoxhaj.
The Albanian government is aware that tax incentives and foreign exchange interventions only serve as a stopgap measure, and it has set out to develop digital export services and improve innovation and competitiveness in the agriculture and tourism sectors. Although the strategy may not yield immediate results, one thing is clear: a revaluing currency can be a challenge. Marcos Fernández bore witness to this: “I spent €50 on a dinner for two without even realizing.”
Source : El Pais