The World Bank has released the Albania Public Finance Review 2025, a report analyzing how fiscal policy can support inclusive growth and macroeconomic stability as Albania moves toward European Union membership. The review examines macro-fiscal trends, revenue mobilization, public expenditure efficiency, and offers sector-specific insights on pensions and early childhood education.
According to the report, while Albania’s economy has strengthened and poverty rates have declined, the pace of convergence with EU income levels remains slow. The review states: "Convergence with the EU requires bold reforms. Albania’s economy is stronger, poverty has declined, and EU alignment is within reach. Yet progress takes time. At the current pace, it could take nearly a generation to reach half the EU average income. Demographic shifts, climate risks, and persistent structural challenges mean fiscal policy must play a central role in driving long-term growth, macroeconomic stability, and equitable resource distribution."
The document highlights that revenue collection in Albania continues to lag due to informality in the economy, broad tax exemptions, and gaps in enforcement. Under its Medium-Term Revenue Strategy (2024–2027), Albania plans measures such as formalizing short-term rentals in tourism, introducing a market-value-based property tax, implementing a legislated carbon tax on coal, and increasing tobacco excises. These steps could raise revenues by up to 0.9% of GDP.
"Accelerating progress requires unlocking more resources," notes the report. "Despite improvements, revenue collection remains low due to high informality, broad exemptions, and enforcement gaps. Under the Medium-Term Revenue Strategy (2024–2027), measures such as formalizing short-term rentals in tourism, introducing a market-value-based property tax, implementing the legislated carbon tax on coal, and increasing tobacco excises could raise revenues by up to 0.9% of GDP—supporting sustainable financing and a healthier, greener future. Additional gains will come from reviewing tax exemptions and strengthening tax administration."
On public spending priorities: "Spending smarter is essential to maximize impact," says the review. It points out that pensions and transfers account for over one-third of budget expenditures—limiting funds available for human capital development like education or infrastructure improvements.
The analysis suggests that improving efficiency in education spending could lead to better learning outcomes by 34%, while more effective infrastructure investments might improve overall quality indexes by 18.6%. The report calls for ongoing health reforms; integrated social protection; stronger institutions; and regular reviews of government spending.
Demographic changes are also highlighted as an urgent concern: "Only 46% of the working-age population contributes to pensions," according to the report’s findings; furthermore: "By 2060 up to 34% of Albanians could be over retirement age." This places strain on pension sustainability unless coverage expands or incentives are created for longer working lives.
Finally, investment in early childhood education remains limited—spending stands at just 0.08% of GDP compared with much higher OECD averages—and only one-tenth of children under three attend public crèches: "Expanding access and improving local government financing are critical to building Albania’s future."