Albania’s Financial System: Challenges and Opportunities

State-Owned Enterprises (SoEs) and Private Investment

• The Albanian energy sector is hindered by weak state-owned enterprises (SoEs), which pose a significant risk to the country’s debt ratio and fiscal stability.
• Despite some growth, private investment plays a relatively minor role in financing economic development in Albania compared to public finance.

Banking Sector Dominance and Lending Growth

• The Albanian financial system is dominated by banks, accounting for 90% of the sector’s assets.
• Bank lending has increased significantly since 1998, with a nominal value of bank lending rising from 10% of GDP to 33.4% in 2022.

Non-Performing Loans (NPLs) and Debt Burden

• The rate of banks’ non-performing loans (NPLs) has declined significantly, from 25% in 2014 to 5% in September 2023.
• Banks remain the main debtholder in Albania, holding over 63% of the country’s total burden of sovereign debt in 2022.

Capital Market Development

• The Tirana Stock Exchange (TSE) has been suspended since 2022 due to a lack of investor confidence and inadequate market infrastructure.
• The Albanian Securities Exchange (ALSE), established in 2014, provides a licensed private institution for securities exchange.