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Albania is ranked 50th in the world in the index of economic freedom, published by the Heritage Foundation, increasing by 1.4 points compared to the previous assessment, after the deterioration it had recorded in the 2021 report.
Albania, with 66.6 points, enters the group of moderate free economy, which is the third category (60-69 points), after the completely free economy (80-100 points) and mainly free (70-79.9 points). Completely free economies are Singapore, Switzerland, Ireland, New Zealand.
Our country has the greatest economic freedom in the region, leaving behind Northern Macedonia (53), Serbia (59), Bosnia and Herzegovina (68). Kosovo (86) and Montenegro (103) are ranked worse.
The index of economic freedom is based on four main categories:
Enforcement of rules (Property Rights; Judicial Effectiveness; Government Integrity)
-Government size (Tax burden; Government expenditures; Fiscal Health)
-Efficiency of regulatory institutions (Business Freedom; Freedom of Labor; Monetary Freedom)
Open markets (Freedom of Trade; Freedom of Investment; Financial Freedom).
The highest (positive) ratings are for the tax burden (89.1 points), trade freedom (82.6) and monetary freedom (82). The lowest rating is for the integrity of the government (35.6 points) and the effectiveness of the judiciary (49.8).
According to the report, during the last five years, Albania’s economy grew from 2017 to 2018, slowed down to 2019, turned negative in 2020 and recovered in 2021. Albania has recorded an overall growth of 2.2 points of economic freedom that from 2017, led by increased results in property rights and judicial effectiveness, but still remains in the middle range of “Moderately Free” countries. Government size and open market indicators are positive, but the rule of law remains problematic.
Law enforcement
The report assesses that property protection is weak, due to the ambiguity of titles, in part because court manipulation makes it possible to obtain illegal and sometimes overlapping titles. The registration system is insufficient. The independent judiciary is subject to political pressure, intimidation and limited resources. Economic growth is hampered by endemic corruption, uneven enforcement of legislation, heavy bureaucracy, distortions of competition and lack of transparency.
Government size
The highest individual income tax rate is 23 percent, and the highest corporate tax rate is 15 percent. The total tax burden is equal to 18.3 percent of total domestic income. Government spending has reached 30.5 percent of total output (GDP) over the past three years, and budget deficits have averaged 3.3 percent of GDP. Public debt equals 76.0 percent of GDP.
Efficiency of regulatory institutions
Doing business in Albania can be difficult. Informal business practices and irregular government procurement processes contribute to business uncertainty. Labor laws are not applied equally. The share of informal employment has been highest in the region. The energy sector is currently entirely dependent on an unsustainable system of state subsidies.
Open markets
Albania has in force five preferential trade agreements. The weighted average trade tariff rate is 3.7 percent and 196 non-tariff measures are in force. Despite some progress in modernizing the investment regime, there are restrictions on foreign ownership. The financial system remains relatively stable. The banking sector is well provisioned.
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