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Albania, Economy

failing infrastructure, poorest country, land reforms, Albanians, economic transformation

Albania emerged from the Communist era as the poorest country in Europe. Under the Communists, the state controlled all economic activities; private ownership and private enterprise were forbidden. Because the state tended to invest in heavy industry, the popular demand for consumer goods was neglected. Furthermore, the constitution did not allow other countries to invest in or aid Albania. On the other hand, there was little unemployment since the state guaranteed almost everyone a job.

In the early 1990s Albania’s new, democratically elected leaders started a far-reaching program to reform Albania’s economy. Many state businesses were privatized, key decisions about production and demand were taken away from the state, and restrictions on trade and foreign investment were lifted. At first, between 1989 and 1992, the disruption brought by the end of the Communist era and the start of market reforms led to a steep economic decline with soaring unemployment and widespread poverty. However, in 1993 Albania’s gross domestic product (GDP) grew by 11 percent; in 1994 by 7 percent; and in 1995 by 6 percent—the highest growth in Europe. From 1992 to 1995 inflation dropped from a yearly average of 226 percent to 7 percent, and by 1995 the state controlled only 40 percent of the total economy. The rapid growth was due mainly to a recovery in farming spurred by rapid privatization and land reforms. In 2000 the GDP was $3.75 billion, or about $1,100 a person.

Foreign aid, initially critical during the economic transformation, has become less important since the recovery in farming. However, the country still relies on tens of thousands of Albanians working in Greece, Italy, and Germany who send hard currency home to support their families. While living conditions for most Albanians have improved and consumer goods and services are more available now than they were under Communism, poverty is still extensive. Other problems included a failing infrastructure, obsolete machinery, lack of raw materials, a shortage of skilled workers and managers, and poor labor discipline.

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