Economic Growth, Labour, and Agriculture

(Text from the Programme of Cooperation 2017-2021)

Economic growth priorities, policies, and programmes of the GoA are inclusive, sustainable, and gender-responsive, with greater focus on competitiveness, decent jobs and rural development.

Overview:

Prior to the 2008 global financial crisis, poverty in Albania fell by half to about 12% garnering the country upper middle-income status. Despite these achievements, Albania is one of the poorest countries in Europe. The number of people living in poverty increased to 14% in 2012 and child poverty rose from 18% to 20%. In addition, the benefits of economic development have not been evenly distributed. The country’s Gini coefficient of 34.5 in 2013 is the third highest in the region and trends suggest growing inequalities. There was a relatively high level of FDI inflow into Albania over recent years (equivalent to 8.8% of GDP in 2014, up from 7.7% in 2012), despite recent uncertainty in the Euro zone. Albania’s private sector development and regulatory reforms are expected to result in an increase in FDI.

The overall unemployment rate for the age group 15-64 rose from 13% in 2012 to 18% in 2014. Young people from 15 to 29 years old are the most disadvantaged, with a 34% overall unemployment rate.The proportion of young people who are not in employment, education or training exceeds 30%, and has increased by 6% in 2014. Women’s participation in the labour market fell during the 1990s, from 78% in 1989 to 39.1% in 2003, due to the loss of state-supported child care and unemployment, particularly in the public sector. While it has since increased to 51% in 2014, the average salary of women is almost 18% lower that the salary of men. In rural areas, the wage gap is almost twice as high as compared to urban centres.

Employment is predominantly in agriculture, which accounts for 1/5th of GDP and half of total employment, and services. The relatively low level of employment and share of employment in manufacturing, construction, mining quarrying and utilities overall is a concern for future diversified growth and employment prospects. The overall share of employment in these sectors was below 9% in 2014. It also shows marked gender disparities. Less than 1% of women’s jobs are in construction, extractive industries and utilities, while 10.4% of them were in manufacturing, compared to 7.3% of men. The proportion of youth who are not in employment, education or training (NEET) exceeds 30%, and has increased by 6, 5% in 2014 (32, 5%) compared to 2012 (26%).

A major constraint for the generation of decent work opportunities is the inconsistent implementation and monitoring of approved national strategies for employment and skills, business development and entrepreneurship, and the youth action plan. There is also an absence of systematic inter-sectoral coordination and management. In addition, recommendations to amend the labour code have not been followed, training and awareness campaigns at local level are missing, and public awareness of the law on protection against discrimination and of the complaints mechanism are low.

Albania has implemented a series of reforms, including streamlined procedures for starting and closing a business, improved access to credit, strengthened competition laws, and improved contract enforcement. However, the 2015 Ease of Doing Business Index ranked Albania 97th of 189 economies and 24th of 25 European and Central Asian economies, suggesting significant scope for improvement in the business environment. In particular small and medium-sized enterprises (SMEs) still face significant regulatory burdens and red tape. There are limited policies and measures to support green economy programmes and the greening of Albania’s economy could have positive impacts on job creation, in addition to environmental benefits, such as a reduction of CO2 emissions.

In the area of trade, more needs to be done to harness trade for inclusive economic growth. While the Government has achieved important progress in aligning its overall trade regulations and procedures with the EU Acquis Communautaire requirements, capacity shortfalls within Government agencies impede full realization of reform benefits. These shortfalls manifest themselves in regulatory and procedural barriers to trade, which inflate transaction costs and, thereof, undermine the competitiveness of manufacturing and agribusinesses in local and global markets with adverse consequences for employment generation and poverty levels. There is also a need to further develop the country’s overall system of standardization, quality assurance and metrology. 

In agriculture there are complex patterns that affect the ability of rural Albanians to secure sustainable livelihoods. Root causes can be traced to customs and conventions which endure from the Communist era: small farm sizes and land fragmentation, poor rural credit markets, weak rural planning, and inefficient targeting and use of agricultural inputs have contributed to low productivity. The ageing agricultural workforce and weaknesses in the education system are not helping to prepare the next generation of Albanian farmers to grasp the opportunities from EU agricultural markets. In addition, the gender dynamics of the rural and agricultural economy put women at a disadvantage in terms of land ownership and access to credit and other agricultural inputs. Land and agriculture-related information and registration systems are not well developed and insufficiently sensitive to gender-based and other forms of discrimination. Harmonisation with EU legislation in areas of food safety, veterinary services, and agricultural chemicals will be a major challenge.

Strategies:

To respond to these challenges, programme strategies will make economic growth priorities, policies and programmes more inclusive, sustainable, and gender responsive, and address major structural constraints related to decent job creation especially for young people and other vulnerable groups, business competitiveness, and rural development. Strategies will:

  • Strengthen the delivery of economic support services at national level and local levels that promote gender equality and green economy and contribute to inclusive and sustainable industrial development;
  • Support further reform of regulatory and tax policies to reduce red tape for entrepreneurs,
  • Improve governance of the labour market, and support tripartite dialogue between government, industry, and labour;
  • Enhance the employability of youth, women and other vulnerable groups;
  • Address gaps in occupational health and safety policies and standards; 
  • Develop new capacities to design and implement policies and strategies for sustainable rural development and modernisation of the agricultural sector that are gender-sensitive and empower rural women;
  • Enhance agricultural production and value chain development, with focus on small rural households;
  • Enhance capacity to build/revitalize infrastructure inter alia through public-private partnerships  and foster innovation sector;
  • Improve access to adequate housing including for those with special needs and vulnerable population groups;
  • Support integration of traders into regional and global value chains;
  • Strengthen cultural industries, promote cultural diversity and management of cultural heritage as a vehicle for sustainable development.

Vulnerable groups

This outcome will respond to: Unemployed young men and women (15 – 29); Roma and Egyptians; Persons with disability; Returning migrants; Women single heads of households; Victims of trafficking and/or domestic violence.

For more information, please see Joint Work Plan 2017-2018 - Outcome 3 Economic Growth, Labour and Agriculture.