Albania's Current Demographic, Economic Status Can't Be Taken Lightly
The Albanian Conservative Institute has just released a comprehensive study on Albania's economic model, and its findings should trouble policymakers in Tirana, Washington and Brussels.
Behind the façade of steady growth, Albania, an EU candidate and NATO member, has become dangerously dependent on illicit money flows.
Unless the trajectory is reversed, this “mirage economy” threatens not only Albania’s democracy and stability but also Europe’s security and America’s strategic interests in a fragile region.
The numbers speak for themselves.
Albania's GDP reached €24 billion in 2024, with growth averaging 4% in recent years.
Yet, productive sectors are collapsing: industry and agriculture are in recession, while construction and services, sectors with high returns where illicit money is laundered dominate the economy.
The OECD EU Convergence Report puts Albania last in the business climate.
If we were to combine available sources, both journalistic and from global authorities, illicit inflows would amount to at least 4 billion euros annually, or around 17% of GDP.
The latest U.S. Department of State Investimate Climate Statements highlighted these same concerns.
The distortion goes further.
The shadow economy makes up 30–35% of GDP (€7–8 billion), the highest in Europe, where the average is 10%.
Bank of Albania data shows that only 22% of construction is financed by bank credit, leaving most projects fueled by unexplained capital.
Cash in circulation is €4.5 billion, 18% of GDP, double the EU average, and the Balance of Payments contains €0.8 billion in unexplained "net errors" (3.1% of GDP, highest in Europe), almost certainly illicit inflows.
Foreign investment is skewed.
While industry and energy declined, real estate FDI has grown from 5.7% of inflows in 2014 to 29% today.
Yet, Albania has the lowest FDI growth rate in the region, and the lowest ranking for business climate and infrastructure among Western Balkan countries.
Trade data reinforce the picture of fragility.
The goods trade deficit is -25.3% of GDP in 2025. Exports are at €4 billion and have fallen for three consecutive years.
Agriculture, still employing 30% of the workforce, has contracted every quarter since 2021. Remittances (€1.2 billion annually) and tourism (20-25% of GDP) cannot explain the
Albanian lek's 30% appreciation against the euro since 2015, and this year was tourism's worst in the last few years.
Last year the central bank intervened with €933 million in currency purchases, yet the exchange rate barely moved, evidence of massive illicit euro inflows.
Meanwhile, Albania faces demographic collapse.
According to EUROSTAT, 1.1 million citizens, 40% of its population, have emigrated since 2014.
Births fell 6.5% in the first half of 2025 after a 5% decline in 2024.
Since 2021, deaths have consistently outnumbered births, and the UN ranks Albania first in the world for natality decline.
To fill the labor gap, the government has imported workers from Asia and Africa, many of whom intend to use Albania as a transit point to the EU and UK.
The social consequences are severe.
Poverty is near 20%, while 42% face social exclusion. The average monthly wage is €838, while the country has the lowest minimum wage in Europe.
In Tirana, where population density has reached 20,000 residents per square kilometer (four times the EU average), 51,129 apartments sit empty, vacancy rates hover at 33-40%, and air pollution has caused 100,000 premature deaths since 1990.
The Albanian Conservative Institute's econometric model confirms the danger presented by international reports.
If illicit flows were reduced by 30%, GDP would contract in Year 1, 0.85% and unemployment would rise.
A full cutoff would shrink GDP by 2.8% in the first year and collapse construction.
These shock scenarios demonstrate just how dependent Albania has become on illicit money.
Why should this matter to American and European readers?
Because Albania is a NATO member on the Adriatic, directly across from Italy.
In a transitioning world order with growing geopolitical threats, NATO can't afford a weak link at its southern flank.
For the U.S., which has renewed its war on cartels under President Trump, Albania represents both a frontline and a vulnerability.
For the EU, it raises the question of whether enlargement means importing instability rather than exporting stability.
The Albanian Conservative Institute proposed a clear blueprint to the government and to the opposition, as well as Albanian society.
First, dismantle these illicit flows with uncompromising enforcement: strengthen customs, modernize intelligence, and establish an independent anti-laundering task force.
Second, cut taxes and regulations to unleash supply-side dynamism and shift resources from construction bubbles to production and exports.
Third, reduce government favoritism and state capture by auditing all tenders, excluding shell companies, and privatizing inefficient state enterprises.
Our vision is simple yet ambitious: transform Albania into a producing and exporting economy, competitive in agriculture, energy, health services, and technology, anchored in free markets and strong institutions with checks and balances.
With a low-tax regime, limited government, and investment in innovation, Albania could double per capita GDP by 2030 and stem the demographic hemorrhage by giving its citizens a reason to stay.
Time is short.
For the U.S. and Europe, the stakes are clear: a stable, prosperous and democratic Albania is a bulwark of the West.
An unsustainable economic model at NATO’s southern flank is a threat.
Nikola Kedhi, Executive Director of the Albanian Conservative Institute. Read more of his reports — here.