Albania’s economy remains one of the fastest-growing in Europe, supported by strong tourism, contained inflation and declining public debt, but structural challenges and rising external risks threaten its medium-term outlook, the International Monetary Fund said in a statement.

In a concluding statement following Article IV consultations, the IMF said real GDP growth is expected to reach 3.5% in 2025, easing slightly from recent post-pandemic rates, with a further uptick to 3.6% in 2026. Headline inflation, currently subdued, is forecast to edge up to the Bank of Albania’s 3% target in the second half of 2026, driven by tight labour markets and rising wages.

The IMF said Albania was at a “pivotal juncture” as it pushes forward with reforms aimed at securing European Union membership by 2030, but warned that productivity remains weak and reform gaps with EU rules are still significant.

Tourism — now a key economic driver — continues to support growth, while the current account deficit is projected at 2.8% of GDP in 2025, widening gradually to around 3.5% over the medium term as income rises and public investment boosts imports.

Risks to the outlook have shifted to the downside, the IMF said, citing global geopolitical tensions, commodity price volatility and potential financial market instability. Domestically, labour shortages linked to emigration could push up inflation and weigh on growth.

Public debt is forecast to fall to about 50% of GDP by 2030, down from a projected 54% in 2025, assuming continued fiscal discipline and a small primary surplus. But spending pressures from ageing demographics, health care, defence commitments and pension increases could strain finances unless reforms advance, the IMF cautioned.

The Fund urged authorities to overhaul tax policy, phase out costly exemptions, strengthen compliance and accelerate implementation of a value-based property tax. It also warned that a planned “Fiscal Peace Agreement” — which would cancel tax debts and suspend audits — could undermine compliance and reverse recent improvements in tax administration.

On monetary policy, the IMF said the Bank of Albania’s current 2.5% policy rate remained appropriate but urged readiness to adjust quickly if wage pressures intensify. The central bank should also allow greater currency flexibility and limit foreign-exchange interventions to non-fundamental shocks, it said.

Financial stability risks remain contained, but the Fund called for tighter supervision, especially of foreign-exchange lending, large sovereign exposures and rapidly expanding real estate lending.

To sustain growth and support convergence with the EU, the IMF said Albania must strengthen labour markets, improve education and training, boost research investment and continue governance and anti-corruption reforms.

“Without decisive policy implementation, Albania’s competitiveness and productivity could stagnate, limiting the benefits of EU integration,” the mission said.