Albania is set to close the year with a notable budget surplus of 0.5 billion lekë, signaling positive momentum for the country’s economy as it heads into 2025. Announced by Finance Minister Petrit Malaj, the 2025 budget focuses on sustainable economic growth and ongoing fiscal consolidation. With projected GDP growth of 3.9% for 2024, the surplus is largely attributed to increased domestic demand, rising consumer activity, and strong exports, especially in tourism.

Why is this important: Achieving a budget surplus is significant for Albania as it enables the government to lower its debt levels, signaling fiscal health and reducing reliance on borrowing. A budget surplus not only enhances investor confidence but also serves as a buffer, protecting the economy against potential financial shocks. This fiscal discipline strengthens the foundation for sustainable growth, enabling Albania to focus on strategic investments that drive long-term prosperity. Moreover, a surplus reflects positively on Albania’s standing in international markets, making it a more attractive destination for foreign direct investment (FDI) and further bolstering the LEK. 

Context: Albania’s budget surplus is fueled by a combination of strong domestic demand and favorable conditions in key sectors. With the economy expanding by 3.9% in the first half of 2024, driven by growth in the services and construction sectors, Albania’s focus on economic diversification is bearing fruit. These sectors not only boost GDP but also contribute to job creation and wage growth, resulting in increased consumer spending that supports a robust cycle of economic growth. The steady rise in consumer demand and overall spending is expected to further contribute to economic expansion in the upcoming year.

Exports have also been pivotal in creating this surplus, with the tourism sector playing an instrumental role. The increased influx of foreign visitors has strengthened the national currency, which in turn has helped bring inflation down to 2.3% in the first nine months of 2024. A stronger currency enhances purchasing power, fueling both domestic and export-driven growth.

What’s next: The 2025 budget outlines a plan to reduce Albania’s debt-to-GDP ratio to 55.8%, down from an estimated 56.3% at the end of 2024. This reduction in debt allows the government to allocate more resources to public infrastructure, healthcare, and education. With projected public revenue of 754.6 billion lekë, the government plans to responsibly increase public spending in vital sectors, enhancing the quality of life for Albanian citizens while ensuring economic resilience.