Industry contracted during the January-March period, with net sales volume falling 3.1% year-on-year, production declining 4.9% and employment down 2.9%. Despite the slowdown, the sector’s wages increased by 7.5%.

The electricity, gas and steam supply sector recorded strong growth across all key indicators. Net sales volume rose 17.6%, while production surged 45% compared with the same period a year earlier.

Employment in the sector increased by 2.1%, while the wage bill rose 13.1%.

The water supply, sewerage and waste management sector also expanded, with net sales volume increasing 15.1% and production rising 5.6%. Employment edged up 0.3%, while the wage bill climbed 18.5%.

Construction maintained its upward momentum in the first quarter, with net sales volume rising 8.6%, production increasing 7.2% and employment growing 5.6%.

The sector’s wage bill rose 22.4% from a year earlier, according to INSTAT.

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Recent balance of payments data from the Bank of Albania shows that foreign investors continue to favor the real estate sector, pouring roughly €174 million into properties—representing 43% of total FDI inflows. Trailing real estate are financial intermediation at 17%, energy at 9%, transportation at 5%, and hydrocarbons at 4%.

The total foreign direct investment structure reveals a shift toward new capital injections. While reinvested earnings from foreign companies still formed the majority at €206 million (51%), they contracted by 3.7% compared to the previous year. Conversely, new capital investments grew by 25.3% to €183 million, reflecting rising investor confidence. Debt instruments continued to play a marginal role, fluctuating around €14 million by the end of the quarter. /j.p/p.s./

Only Financial and Insurance Activities (157,434 ALL) and Information and Communication (131,747 ALL) offer average gross monthly wages that surpass the national average.

Construction workers experienced the highest wage increases at 22.2%, while the arts and entertainment sector recorded the lowest at just 5.5%.

Managers, lawmakers, senior civil servants, and executive directors lead the highest-paying professions with an average gross monthly wage of 136,213 ALL. Professionals follow with an average of 116,074 ALL. Meanwhile, the highest wage growth was observed in craft and related trades 15.7% and elementary occupations 15.3%.

In Q1 2026, employee distribution concentrated at the extremes of the wage scale, showing growth in both the lowest and highest income brackets. The expansion of the minimum-wage segment was triggered by the government raising the monthly minimum wage from 40,000 ALL to 50,000 ALL on January 1, 2026. /j.p/p.s./

The increase was led by a 4.8% rise in wage-related expenses. Other cost components that recorded annual increases included “other costs”, up 2.5%, transport expenses, up 1.7%, and machinery costs, up 1.5%.

Material costs, however, fell 0.9% compared with the first quarter of 2025.

Within that category, construction materials posted the sharpest decline, down 1.4%, followed by plumbing, sanitary and ventilation materials, which fell 0.9%. Electrical and communications materials rose 0.5%.

On a quarterly basis, the Construction Cost Index increased 0.3% in the first quarter from the previous quarter, INSTAT said.

The quarterly rise was mainly driven by a 1.7% increase in “other costs” and a 0.6% rise in wage expenses. Machinery and transport costs each increased 0.3%.

Material costs edged down 0.2% from the fourth quarter of 2025, reflecting declines of 0.8% in plumbing, sanitary and ventilation materials and 0.4% in construction materials. Electrical and communications materials increased 0.2%.

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According to data published by the National Institute of Statistics (INSTAT), Albania’s four main ports – Durrës, Vlorë, Shëngjin and Sarandë (Limion) – handled around 2.28 million metric tonnes of goods during the January-March period, marking a significant increase compared with the same period a year earlier.

The Port of Durrës remained the country’s dominant maritime hub, accounting for 95.2% of total cargo throughput, or approximately 2.17 million tonnes. Cargo volumes at the port rose 39.8% year-on-year, reflecting stronger trade activity and improved logistics flows.

The ports of Vlorë and Shëngjin processed 62,000 tonnes and 40,000 tonnes of goods respectively, while Sarandë handled around 7,000 tonnes.

Metals and metal products represented the largest share of transported goods at 17.6%, followed by refined petroleum products at 14.3% and coal, crude oil and natural gas at 12.7%.

Port activity also increased in terms of vessel traffic, with 265 ship entries and departures recorded during the quarter, including 248 foreign vessels, up 28.6% from a year earlier.

Passenger transport through Albania’s ports also expanded, with 154,019 travellers recorded in the first quarter. Durrës accounted for 77.5% of total passenger traffic, followed by Sarandë with 14.4% and Vlorë with 8.1%.

Meanwhile, the volume of imports and exports transported by sea reached 1.31 million tonnes, up 3.6% year-on-year, according to INSTAT.

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According to air transport statistics published by the National Institute of Statistics (INSTAT) on Thursday, a total of 2,162,098 passengers flew between January and March 2026, compared with 2,083,050 in the same period a year earlier. This represents an increase of 3.8% year-on-year.

During the period, 21 foreign airlines operated in Albania’s air transport market, while 74,329 aircraft movements were recorded in the country’s airspace.

Of the total aircraft movements, 82.6% were overflights. In the first quarter, there were 12,898 flights and 61,431 overflights recorded.

Air cargo and mail traffic also rose over the period. Total cargo volume reached 571 tonnes, of which 74.2% consisted of inbound shipments and 25.8% outbound.

Air freight volumes increased by 3.8% compared with the same period of 2025, reflecting an expansion in trade and logistics activity.

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The report attributes the moderate growth to stronger external demand and a slight slowdown in domestic consumption. Inflation remained below 3%, poverty declined amid improving labor market conditions, and public debt continued its downward trend.

While external risks persist, the World Bank (WB) said progress in Albania’s European Union accession process is expected to support investor confidence, policy continuity, and long-term growth.

Key contributors to growth during the first quarter included services and construction, which offset declines in agriculture and some industrial sectors, despite a slower pace of tourism expansion.

Massimiliano Paolucci, World Bank Country Manager for Albania, said the economy is expected to continue expanding, backed by strong reform efforts.

“We expect Albania’s economy to keep growing, driven by solid reforms. Key priorities include fiscal stability, green development, stronger social protection, improved digital services, and enhanced links with regional and EU markets,” Paolucci said.

The report notes an improved labor market, with unemployment falling to 8.7% and employment among people aged 15-64 rising to 69.5%, for both men and women. Employment gains in services compensated for job losses in agriculture.

Despite wage-driven inflationary pressures, average inflation during the first seven months of 2025 remained low at 2.2%, supported by a stronger lek and easing inflation in the Eurozone.

Fiscal policy in the first half of 2025 moderately supported demand, with the overall fiscal surplus narrowing to 2.7% of GDP from 4.3% a year earlier.

Economic growth is projected to ease to 3.7% in 2025 and 3.5% in the medium term due to global trade uncertainties and shifting international outlooks. However, faster implementation of EU-backed reforms could accelerate per capita income growth by up to 3.1% above the baseline scenario and advance convergence with EU living standards.

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Erald Themeli, Director of Monetary Policy at the central bank, said Thursday that early second-quarter data point to a similar growth pace, bolstered by a notable rise in exports of both goods and services, as well as increased credit across business and household sectors.

“Economic activity has been supported by abundant credit for businesses, for investment or working capital, and for households for general consumption and home purchases,” Themeli said.

Despite external risks, including international market volatility and geopolitical pressures, the central bank forecasts economic growth of 3.5 – 4% for 2025. Inflation, currently averaging 2.3%, is expected to return to the 3% target by mid-2026.

On monetary policy, Themeli noted that the Bank of Albania’s Supervisory Council decided on August 6 to leave the key interest rate unchanged at 2.5%, following a reduction earlier in July. Officials said more time is needed to assess the full impact of the rate cut on financial markets and economic activity.

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Governor Gent Sejko stated Wednesday that Albania’s economic and financial developments have remained positive during the first half of 2025.

Economic activity expanded steadily, with GDP growing by 3.4% in the first quarter, while consumer price inflation stabilized at low levels. Financial markets have been calm, and financing conditions remain accommodative.

Sejko noted that growth was broadly based, supported by increases in consumption, investment, and foreign demand. This stimulated activity in construction and services sectors, although industry and agriculture showed contraction trends.

Labor market conditions improved, with non-agricultural employment rising, unemployment falling to 8.7%, and wages increasing by 9.6% in Q1. These developments reflect rising household incomes but also pose potential cost and inflationary pressures going forward.

Inflation averaged 2.3% in April-May, influenced by higher food and rent prices and less negative oil price inflation. Despite short-term fluctuations, inflation remains below target due to weak external pressures, currency appreciation, and supply-side factors.

The monetary policy stance was eased in response to these developments, aiming to support price stability and economic growth. Bank lending remains robust, with private sector credit growing 16.2% in the first five months of 2025, and credit quality remaining sound.

Looking ahead, Sejko said economic growth is expected to continue near potential, supported by domestic demand, stable labor markets, positive confidence, and accommodative financing conditions. Inflation is forecast to return to the 3% target by early 2026.

Risks to inflation remain balanced, with geopolitical tensions and trade conflicts posing upside risks, while slower Eurozone growth and lower inflation abroad offer downside risks.

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According to data published by the Institute of Statistics INSTAT, the Gross Domestic Product (GDP) increased by 3.39% in the first quarter of 2025 compared to the same period last year.

Referring to the data, the greatest contribution to this growth belongs to the public administration, education and health sector which contributed 2.24% to the total GDP.

This growth is closely related to the increase in public spending and investments in health and education, which have played an important role in increasing domestic demand and improving public services. /a.gj//a.f/p.s./