Property rights and freedom from corruption are weak, and government interference and
regulatory control continue to limit dynamic investment and overall economic efficiency,
according to the report
TIRANA, Jan. 27 – Albania lost nine places in the 2015 Index of Economic Freedom on declining
business, fiscal and investment freedom, but yet maintained its position as one of the best
performers in the Western Balkans, according to an annual report published by U.S-based
Heritage Foundation and the Wall Street Journal.
This year’s report ranked Albania 62nd out 178 countries compared to 53rd in 2014 when it
achieved its best ever ranking as moderately free economy.
“Property rights and freedom from corruption are weak, and government interference and
regulatory control continue to limit dynamic investment and overall economic efficiency,” said
the report.
Albania’s economic freedom score is 65.7, making its economy the 63rd freest in the 2015
Index. Its overall score decreased by 1.2 points, with notable declines in business freedom,
fiscal freedom, and investment freedom. Albania is ranked 29th among the 43 countries in the
Europe region, and its overall score is above the world average.
“The Albanian economy is mostly in private hands, but the state continues to control key
enterprises, particularly in the energy sector,” the report noted. “Although foreign direct
investment has increased in recent years, overall levels still remain among the lowest in the
region. Deeper structural reforms to diversify the economy and improve labor market flexibility
remain critical for more broad-based economic development.”
The increase of taxes for high earners and the rise of the corporate income tax seem to have
had a negative impact on this year’s ranking.
“The government has raised its top marginal individual and corporate income tax rates. The
top individual income tax rate is now 23 percent, and the top corporate tax rate is 15 percent.
Overall tax receipts remain stagnant at around 23 percent of gross domestic product. Public
expenditures amount to 28.2 percent of the domestic economy, and public debt is equal to
around 70 percent of domestic income,” the authors wrote.
Despite recent reforms, the inefficient business environment still impedes broader economic
development. On average, launching a business requires five procedures, but obtaining
necessary permits can take over 200 days, according to the report.
“In the absence of a well-functioning labor market, informal labor activity persists. Price controls
and government subsidies distort domestic prices for electricity, water, agricultural products,
and railroad transportation,” it added.
Albania achieved its best ever result in the Index of Economic Freedom in 2010 when the
country ranked 53rd. In 2013, the country ranked 58th while back in 2012 and 2011 it ranked
57th and 69th respectively.
Opposition representatives accused the current Socialist-led government of dismantling the
good work the center right Democratic Party had done to improve Albania’s economic climate.
The leftist ruling coalition in turn accuses the Democrats of leaving behind economic ruin and
high public debt.
The 20th annual edition of the Index of Economic Freedom covers 186 countries, evaluating
their performance in four broad areas of economic freedom — rule of law, regulatory efficiency,
limited government and open markets. It ranks the surveyed economies on the basis of 10
indicators, including property rights, freedom from corruption, fiscal freedom and government
spending. Based on their aggregate grades, countries are classified into five groups: free,
mostly free, moderately free, mostly unfree or repressed.
