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Albania deepens its lead as Europe's "champion" in construction in 2024

2025-06-24 08:24:00, Ekonomi CNA

Albania deepens its lead as Europe's "champion" in construction

The construction sector contributed 14.4% to the creation of Albania's overall economic value in 2024, according to data published by Eurostat, with an increase of 0.6 percentage points, compared to the level of 13.8% that this sector occupied a year earlier.

Albania has the highest level of construction contribution in Europe, while in the European Union, the average share of this sector in gross value added[1] was 5.6%, or almost three times lower than in Albania.

The second country with the highest contribution of construction to the economy is Kosovo, with 9.8% in 2024, down from 10.7% the year before. In third place is Slovakia, with 8.7%, followed by Iceland, with 8.4%.

In the region, apart from Albania and Kosovo, the most construction is done in North Macedonia (6.6% of gross value added), followed by Serbia (5.9%), Bosnia and Herzegovina (5.5%) and the last is Montenegro with 3.9%. In Europe, the country that builds the least is Greece, where construction contributed 2.2% to the creation of the country's economic value.

Albania's dependence on construction has been on the rise again in recent years. In 2019, the earliest year for which Eurostat reports data, construction contributed 13% of the economy.

The high weight of construction in Albania reflects an excessive dependence of the economy on this sector and investments in real estate. With the sector accounting for almost 15% of gross value added, any movement in the property market or slowdown in construction could disproportionately hit employment, fiscal revenues and overall economic growth.

Second, the focus on the construction sector indicates a lack of diversification of the economy, especially towards innovative services. This makes the economy more sensitive to business cycles and geopolitical risks.

Construction has always been a companion of the economy, with two cycles. The first was after 1999, reached maturity in 2011 and then began to decline until 2015. From 2017, a new cycle began, initially driven by construction in the capital, and then on the coast. The second cycle has not yet reached maturity and it is not known when it will happen as construction permits, especially in the capital, are reaching a record every year, where new multi-story building projects are presented every day.

Cross-sectional data between income (wage) growth, real economic activity, bank credit, business structure and real demand suggest that part of this sector is financed by informal sources. For example, since 2014, apartment prices have increased 10 times more than the average salary, making it almost impossible for the middle class to buy an apartment, which today costs a minimum of 1500-2000 euros/m², while the average monthly salary is around 770 euros/month.

The significant strengthening of the Lek is another factor indicating the high presence of informal money. Since the end of 2016, when the second wave of construction began, the Euro has depreciated by about 27% (the common currency was exchanged for an average of 100.7 Lek in 2024, from 137.4 Lek in 2016). For the same period, the current account deficit (which measures the inflows and outflows of foreign exchange from the country) has not marked a significant improvement, as a result of the high level of imports in a country that almost no longer produces anything./ Monitor.al