By Nikola Kedhi
On paper, Albania enters 2026 as a “success story”: the government speaks of GDP growth around 4%, low inflation, public debt at roughly 53% of GDP, and presents the 2026 Budget as a continuation of stability.
In reality, Albania is an economy structurally dependent on construction where extraordinarily large amounts of illicit money are funneled marked by massive depopulation and a freefall of agriculture, industry, and the middle class.
The Albanian Conservative Institute’s analysis of the 2026 State Budget, alongside our study on Albania’s Economic Model published in September, shows that these two Albanias never meet. The Budget projects a normal country; the real indicators reveal a failed economic model and the most fragile economic moment Albania has faced in many years.
According to INSTAT, over 60 percent of GDP growth in 2025 is driven by household consumption and the public administration government spending and family expenditures on food and basic goods while the contribution of the productive sector is negative: agriculture contracted by –2.5% and industry by –1.8% in the second quarter of 2025 alone. Albanians spend on average 40 percent of their household budget on food whose prices have risen by around 30 percent in the last three to four years while the poorest families spend up to 60 percent. In EU member states these shares stand between 10–12%.
This decline is not an episode; it is a trend. The fall of agriculture began in the second half of 2020 and has not stopped since. Every year after 2020 has closed with shrinking agricultural output: –1.6% in 2021; –4.8% in 2022; –1.3% in 2023; –2% in 2024. INSTAT’s own data show agriculture and industry in continuous recession, while agriculture’s share in GDP has dropped from about 20% a few years ago to roughly 15.4% in 2024. In other words: Albania is not growing because it produces more, but because it builds more, expands its administration (one of the main contributors to economic growth in the first half of 2025, with an extraordinary 17% increase compared to the same period a year earlier), and counts as “growth” the inflation of prices and the swelling of money supply.
The 2026 Budget rests on the assumption that this model is sustainable. It projects revenues of 823 billion lek and expenditures of 886.8 billion lek, with a deficit of 2.3% of GDP and real growth of 4%. But what if actual growth is lower? The IMF downgraded again its projection for 2025 from 3.8% in June to 3.4% in September. The World Bank likewise expects only 3.4% growth for 2026, below the government’s 4% forecast.
The government boasts that this is the largest budget ever, yet revenues amount to only around 27% of GDP approximately the same level as during the era of the 10% flat tax, despite the fact that taxes have doubled and tripled over the last decade. The government also claims success in reducing public debt to 53–54% of GDP, but fails to note that this “reduction” results from the euro’s depreciation by over 30% since 2015 coinciding with the mass cannabis boom—not from improved fiscal management. When a large share of debt is denominated in euros, the euro’s weakening against the lek automatically lowers the debt-to-GDP ratio in lek terms even if the real economy produces nothing more. Put simply: debt “falls” on paper not because we saved, but because the exchange rate was manipulated by circumstances.
The U.S. State Department’s latest International Narcotics Control Strategy Report lists Albania among the “major money laundering jurisdictions” and emphasizes that “corruption, organized crime, gaps in the legal framework and inter-institutional coordination make Albania vulnerable to money laundering, with criminals using real estate purchases, construction projects, virtual assets and various businesses to clean illicit proceeds.” Foreign media repeatedly report enormous quantities of narcotics seized by other countries and many estimates put the impact of illicit money to a minimum of 20% of Albania’s GDP. Only 22% of construction activity is financed by the banking sector; the rest comes from unexplained sources.
Similarly, City A.M. in London recently wrote: “Of course, there are no official figures, but the country is now called ‘the Colombia of Europe’. Estimates suggest that between one-third and one-half of Albania’s gross domestic product comes from drug trafficking. Several billion euros are generated every year.” The 2025 Global Organized Crime Index, published in November, places Albania with the highest criminality level in the region, home to mafia groups with significant economic influence. Yet the Ministry of the Interior’s budget contains no meaningful investment in policing capacity, no task force against organized crime, and no enhancement of logistical or technological capabilities despite repeated demands by our international partners.
While the government’s spreadsheets parade “stability,” Albania’s social reality is brutal. According to EUROSTAT and the UN’s country report, over 41% of the population is at risk of poverty or social exclusion the highest percentage in Europe while extreme poverty reaches 20%. Another survey shows that about 55% of Albanians say they barely make ends meet each month. Some 120,000 pensioners returned to the labor market in 2024 because they cannot afford living costs and because the economy is desperate for workers.
Demographically, Albania is heading toward emptying out. EUROSTAT data show that around 1.1 million citizens nearly 40% of the population have emigrated since 2014, while in recent years deaths far exceed births. This is not a development model; it is a depopulation model. Yet the 2026 Budget proceeds as if no anti-depopulation plan is needed. It continues inflating the public administration and recurrent spending, without a serious strategy for agriculture, industry, production. Capital investments center on PPP projects and public tenders often clouded by suspicion where the risk is public and the profit private. The bonus for 791,000 pensioners is planned at just €100 million (equivalent to 124 euros per year per pensioner, or 35 lek per day), while PPPs receive €126 million concentrated in very few hands.
The OECD’s Economic Convergence Board for the Western Balkans ranks Albania last in business climate and infrastructure, and second-to-last in productivity and digital transformation. The same downward trajectory is reflected in the most recent survey by FIAA, the Foreign Investors Association of Albania.
Thus, while the Budget speaks of “reforms,” reality shows an environment where honest capital leaves and criminal capital thrives. A serious budget for a country in this kind of crisis cannot continue to rely on construction, dirty money, and nominal growth. It must break with the current philosophy and shift decisively from consumption to production, from state capture to market competition, from illicit capital to productive investment, from political rhetoric to policies that actually reduce the cost of living and support families, farmers, small entrepreneurs, and workers who today carry the entire system on their backs.
The 2026 Budget may look impressive in government PowerPoint slides. But the real economy does not need PowerPoints; it needs production, honest work, lower taxes, and institutions that prevent rather than nourish the capture of the state.
In the end, the question is simple: will we keep building towers on sand on euros flowing in from cocaine corridors and the mass departure of our people or will we finally build an economy that produces, exports, and keeps its citizens here?
As it stands, the 2026 Budget belongs to the first scenario. Albania deserves the second.
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Nikola Kedhi is the Executive Director, Albanian Conservative Institute
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