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101

How Do We Measure Economic Freedom?See page 477 for an explanation of the methodology

or visit theIndexWeb site at heritage.org/index.2011 data unless otherwise noted.Data compiled as of September 2012.

Quick Facts

plt: 3.2 million

gdp (ppp): $24.9 billion

2.0% growth in 2011

5-year compound annual growth 4.4%

$7,741 per capita

uemlymet: 13.5%

ift (cpi): 3.4%di ifw: $1.0 billion

pl det: 58.9% of GDP

Economic Freedom Score

Least Mostfree free

50

25 75

0 100

0 20 40 60 80 100

Country Comparisons

Freedom Trend

Country

WorldAverage

RegionalAverage

FreeEconomies

2009 2010 2011 20132012

62

63

64

65

66

67

65.2

59.6

66.4

84.5

65.2

ALBANIA

World Rank:58 Regional Rank:27

Albanias economic freedom score is 65.2, making its econ-

omy the 58th freest in the 2013Index. Its overall score has

increased by 0.1 point, with declines in property rights and

labor freedom offset by improvements in business freedom

and the management of public finance. Albania is ranked 27th

among the 43 countries in the Europe region, and its overall

score is above the world average.

Albanias economy has benefitted substantially from a decade

of increased openness and flexibility and weathered the

immediate impact of the global economic crisis relatively

well. Over the past two years, however, economic dynamism

has slowed. Expansionary public spending that the govern-

ment hoped would mitigate some of the pain of necessary

adjustments has resulted in budget deficits and rising public

debt, now near 60 percent of GDP.

Although the state continues to control key enterprises, par-

ticularly in the energy sector, the economy is mostly in pri-vate hands. Beneficial structural reforms have included bank

privatization, implementation of competitive flat tax rates,

and modernization of the regulatory environment. Deeper

institutional reforms to reduce labor market regulations and

increase the efficiency of the judiciary, which remains subject

to political interference, are critical to further success. Cor-

ruption continues to undermine the prospects for long-term

economic development.

backgRound:Albania remains one of Europes poorest coun-

tries despite economic and political reforms since the end of

Communist rule in 1992. Sali Berisha has been prime minis-

ter since 2005. His government, a coalition of the center-right

Democratic Party and the Socialist Movement for Integration,

is known for its strong focus on Euro-Atlantic integration. Alba-

nia signed a Stabilization and Association Agreement with the

European Union in June 2006 and submitted a full application

for membership in April 2009. It achieved full membership in

NATO in April 2009 and continues to contribute troops to the

NATO-led mission in Afghanistan. Transportation and energy

infrastructure are poor by European standards, and the econo-my is dominated by agriculture and services, including tourism.

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102 2013 Index of Economic Freedom

Property Rights

Freedom fromCorruption

Fiscal Freedom

GovernmentSpending

Business Freedom

Labor Freedom

Monetary Freedom

Trade Freedom

Investment Freedom

Financial Freedom

Score Changes

Business Freedom

Labor Freedom

Monetary Freedom

REGULATORY

EFFICIENCY

OPEN

MARKETS

Trade Freedom

Investment Freedom

Financial Freedom

LIMITED

GOVERNMENT

Fiscal Freedom

Government Spending

RULE OF LAW Property Rights

Freedom from Corruption

0 20 40 60 80 100

0 20 40 60 80 100

0 20 40 60 80 100

0 20 40 60 80 100

Country World Average Rank

RULE OF LAWLIMITED

GOVERNMENT

REGULATORY

EFFICIENCY

OPEN MARKETS

5.0

2.0

+1.2

+5.6

+2.8

2.0

0.2

0

0

0

94th

93rd

20th

63rd

30th

133rd

56th

69th

56th

17th

30.0

31.0

92.6

75.1

81.0

49.0

78.4

79.8

65.0

70.0

THE TEN ECONOMIC FREEDOMS

Albania still lacks a clear property rights system, particularly for land tenure. Security of landrights remains a problem in coastal areas where there is potential for tourism development.Significant reform of the legal system is ongoing, but the courts are subject to political pressureand corruption. Protection of intellectual property rights is weak. Albania is a major transitcountry for human trafficking and illegal arms and narcotics.

The entrepreneurial regulatory framework has become fairly streamlined, and starting a busi-ness takes less than the world averages of seven procedures and 30 days. Minimum capitalrequirements are modest. Despite some reform, labor market rules remain relatively rigid.

With international commodity prices stable, inflationary pressures have eased and allowedthe central bank to lower interest rates to stimulate domestic demand.

The trade-weighted average tariff rate is 5.1 percent. There are few formal non-tariff barriers,but inadequate infrastructure and administrative bureaucracy add to the cost of trade. Foreignand domestic firms are generally treated equally under the law, but there are restrictions onforeign ownership of land. Excessive bureaucracy discourages dynamic investment. Bankingconsists mainly of subsidiaries of foreign banks and remains relatively stable.

Personal and corporate tax rates are a flat 10 percent. Other taxes include a value-added tax(VAT) and an inheritance tax. The overall tax burden equals 23.3 percent of total domesticincome. Government expenditures stand at 28.8 percent of GDP, and public debt, which hasincreased since 2007, is around 60 percent of GDP. The 2012 budget included increases in gov-ernment wages and pensions, causing some concern over rising debt levels.

ALBANIA(continued)