After the fall of its communist government in 1991, significant political, social and economic challenges confronted Albania. Albania is a country that lies on the Mediterranean Sea and borders Greece. The fall of the Communist Party left the country with high levels of extreme poverty that it needed to address quickly. As the government has transitioned to a constitutional republic and the centrally-planned economy has shifted to an open-market structure, it has also implemented considerable economic plans and reforms. These reforms partially alleviated the severity of the poverty much of the population faced before 1992, but poverty in Albania continued to be a challenge as the country moved forward.
Understanding Poverty in Albania
- Privatization and a new legal framework were some of the key reforms the government implemented in 1992 that helped to increase the Gross Domestic Product (GDP) and strengthen the economy. The privatization of agriculture, which employs 40% of the population, particularly helped alleviate poverty in the rural areas where it is most prevalent. The new legal framework lowered poverty in urban areas by encouraging the private sector activity necessary for an open-market economy.
- Consistent low-income levels and low administrative capacity are limitations to the success of economic reforms in Albania. The low-income population is particularly susceptible to price fluctuations and unemployment. For this reason, inflation in 1996 and 1997 caused a downturn in the economic growth the country had experienced earlier.
- Fluctuations in the global economy impact the level of poverty. Remittances – money that Albanians working mostly in Greece and Italy sent back to the country – are a significant component of economic growth. After the 2008 financial crisis, remittances decreased from 15% of the GDP to 5.8% by 2015. Simultaneously, the poverty level in Albania increased from 35.8% in 2008 to 38% in 2017. This definition is the percentage of the population living on less than $5.50 per day, the poverty threshold for upper-middle-income countries. The World Bank classifies Albania as an upper-middle-income country.
- Low-skill occupations, including agriculture, require lower levels of education and offer little job security yet employ the majority of the working population living in poverty. Those workers then have limited skills relevant to other types of higher-income labor and have constrained potential for social mobility.
Efforts to Alleviate Poverty in Albania
- Recent growth in labor-intensive sectors has increased the number of potentially higher-income jobs available to Albanians and raised the GDP. Available jobs in textiles, tourism, trade and administrative services have been on the rise since 2013 and contribute to greater economic stability. Tourism, for instance, is one of the fastest-growing industries in Albania. In 2019, the number of foreign visitors increased by 8.1% in comparison to 2018.
- International investments and donations have grown in recent years. The government has attracted international interest by taking the initiative to encourage economic growth by improving roads and rail networks and introducing plans for economic and legislative reform. These reforms primarily focus on strengthening tax collection and increasing public wages and pensions. They have been successful thus far and the World Bank estimates that the poverty rate has lowered to 37% as of April 2020.
- Public debt remains high and a potentially significant barrier to the constant growth necessary to sustain Albania’s economy and keep the poverty level steadily decreasing. Although the debt requires a strong fiscal policy response by the government to avoid economic shocks, it has shown a promising 3% decline rate from 2015 to 2018.
Albania’s Partnership with International Organizations
Although not yet a member, Albania received EU candidacy status in June 2014 and officially adopted the Sustainable Development Goals (SDGs) in 2015. Furthermore, Albania’s government released its National Strategy for Development and (European) Integration 2015-2020 in 2016. It also partnered with the U.N. in Albania to release the Programme of Cooperation for Sustainable Development 2017-2021, a comprehensive plan for sustainable development and alleviation of poverty.
The U.N.’s work in alleviating poverty in Albania and its partnership with Albania’s government has proven to be successful as it has helped achieve sustainable economic development through various reforms. The poverty rate in Albania has shown steady signs of decrease since its peak in 2014. The international community is also supporting the government’s steps to combat poverty in Albania. After a devastating earthquake in November 2019 hindered ongoing efforts for infrastructure improvement and other reforms, Albania’s government received €1 billion in assistance from several international donors during a conference in February 2020.
The U.N. in Albania is just one of the organizations working to fight poverty in Albania through collaboration with the government and other civil society and private sector organizations. Among its goals are Albania’s integration into the EU and the achievement of the U.N.’s Sustainable Development Goals (SDGs), which should stabilize the country’s economy and ultimately lower the poverty rate.
Looking to the Future
The onset of COVID-19 could strain the government’s resources and ability to continue with these reforms to alleviate poverty in the immediate future. However, the U.N.’s work in Albania, support from international donors and stronger commitments from the government to lower the poverty rate point to an optimistic future of long-term development. This should subsequently lead to economic growth and a steady decrease in the rate of poverty.
– Isabel Serrano