GDP growth is unsustainable, experts warn

The Albanian economy grew by 3.61 percent in the second quarter of 2026, compared with the same period a year earlier, according to data published by INSTAT.

Growth was spread across several sectors of the economy, but the largest contribution to GDP expansion came from public administration, education and health, as well as from net taxes on products.

The data show that the public administration, education and health group added 1.38 percentage points, while net taxes contributed 1.13 percentage points. Together, these two components explain about 70% of the growth.

Other sectors such as trade, transport, accommodation and food services also recorded growth. Although construction continues to grow, its contribution to GDP was lower compared with the periods when it was considered a growth engine. Meanwhile, some other sectors such as agriculture and certain export-related activities declined.

Despite the mostly positive headline figures, economics experts say the problem lies in the quality and composition of this growth, raising questions as to whether the current growth is being accompanied by a sufficient expansion of production capacities and investment to guarantee sustainable growth.

Eduart Gjokutaj, head of ALTAX, an organization focused on transparency and sustainable development policies, says the organization’s economic analyses see the problem in the “quality and composition” of this growth.

“This current architecture of the economy is adding volume, but it is not expanding the ‘columns’ and strengthening the foundations for what comes next,” he told BIRN.

So, according to Gjokutaj, growth is not being driven mainly by the expansion of private production capacities; a significant part of it comes from the public sector and from the fiscal component of GDP.

“In the methodology for calculating GDP by the production method, GDP is the sum of gross value added plus taxes on products minus subsidies. Their increase can mathematically raise the contribution, but this growth does not constitute the creation of new production capacity,” he argues.

This, according to Gjokutaj, is a picture confirmed by the contribution of other sectors, where trade, transport, accommodation, construction and food services grew, while agriculture and some export activities with an impact on the labor market fell.

On the other hand, he suggests, the data show that the real sources of growth today are linked more to consumption, services, tourism, real estate, the public sector and the expansion of fiscal revenues than to a powerful cycle of productive investment.

But Gjokutaj notes a mismatch between the growth of fiscal revenues and the economy’s production base, since according to him, “fiscal revenues have grown faster than the productive base that generates them.”

Economist Klodian Muço, too, says the INSTAT data show several interesting aspects of the sectors influencing economic growth, while considering it problematic that the production sectors are not growing.

“We can say that consumption has continued to grow and this is a positive indicator, and employment, perhaps driven by tourism, has again performed positively, and growth from this sector performs positively. Support for economic investment is also a positive indicator, but is this a sustainable indicator?” he told BIRN.

“Of course, the preferred economic growth would be that of production growth,” he added.

According to Muço, agricultural economic growth is negative, while the contribution of the extractive industry is negligible and, unlike other times, the construction sector does not have a significant contribution either.

The need for policies that encourage production

INSTAT data show that the agriculture sector continued to decline in the second quarter, shrinking by 2.29% in annual terms and making a negative contribution of 0.38 percentage points to GDP growth.

Meanwhile, industry returned to growth but its impact on the overall economy remained limited, at only 0.05 percentage points.

For economics experts, incentive policies are lacking for these sectors, which have a more sustainable and longer-term impact on economic growth.

“Policy lacks the strong link between fiscal revenues and the creation of new economic capacity,” Gjokutaj said, adding that policy should abandon the idea of merely realizing budget revenues, since more urgent is the transformation of revenues into productivity, investment and human capital.

“The priorities that should also accompany the 2027 draft budget should be improving the quality of public investment and budgetary discipline (infrastructure, energy, digitalization), accompanying wage growth with productivity growth, shifting from real estate toward productive investment, expanding the economic base (agriculture, industry, professional services) and, finally, measuring fiscal policy by results, not by the budget plan,” he suggests.

For Gjokutaj, the growth of tax revenues from rising consumption, wages, imports and nominal activity, at a time when production capacity and productivity have grown much more slowly, may have strengthened the state budget, but they have not been used effectively to strengthen the production base at the same pace.

In this context, Gjokutaj argues that the current model must gradually move from growth driven by demand, consumption and public activity toward a model supported by productivity and investment.

Economist Muço also considers stimulative policies for long-term growth to be those that affect the sectors that have not performed positively.

“As for long-term growth, policies are needed that stimulate production growth and the automation of production processes, and support is needed for the agricultural sector through subsidies and grants,” he says.

According to him, of course the “sovereign guarantee” or the “double your business” initiative are necessary positive policies, but not sufficient to solve the problems of sectors such as agriculture, the textile industry or the garment sector.