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EC: Climate change, lack of labor force from immigration and population decline pose risks
2023-12-11 08:01:54 / EKONOMI&SOCIALE
The European Commission (EC) has warned in the latest new report that the Albanian economy will face some growing risks next year, coming from internal factors, such as increased climate risks, the problem that has been created in the lack of labor force as a result of high emigration and population decline.
In the report, the Commission said the economy is expected to slow in 2023 and 2024.
"After strong expansion in 2022, which reached 4.8%, Albania's economic growth is expected to moderate to 3.5% in 2023 and 3.1% in 2024, as private consumption is expected to slow due to high food prices and the development of weak employment," says the report.
However, even this perspective is subject to increasing risks, according to the EC, mainly due to Albania's high exposure to climate change, the growing lack of qualified labor due to immigration and the negative development of the population.
In the latest enlargement report, the Commission highlighted the major efforts and investments needed to adapt to climate developments.
"Albania is very exposed to the consequences of climate change. Sea level rise as well as floods/droughts are expected to significantly affect society, public infrastructure and economic activities.
Therefore, climate risk management plans should be adopted at all levels and key vital infrastructures should be climate-proofed to increase the country's resilience to the impacts of climate change."
The EC says that the Bank of Albania should also analyze the exposure of the financial system and credit risks related to climate change.
Another risk is related to the country's high dependence on hydropower for power generation, which makes it vulnerable to climate change.
"The country is a net importer of electricity at about 30% per year, as hydroelectric power is not enough to cover its needs.
Progress is needed in energy interconnection with neighboring countries and the establishment of an integrated regional energy market, to strengthen security of supply and create opportunities for the development and trading of green energy.
Diversification into large solar and wind resources would significantly improve Albania's energy security and reduce its vulnerability to the impacts of climate change."
The problem of finding a workforce, as a result of high emigration and the gradual decline of the population, is another risk for the economy.
"Despite the improved labor market situation, immigration increased by 10.5% compared to 2021, leading to a population decrease of 1.1% in 2022.
This also contributes to the aging of the population and affects the financing of the pension system, in which Albania already has a low ratio of contributors to beneficiaries", says the EC in the enlargement report.
The report highlights growing business concerns as a result of labor shortages.
"There is a growing perception that difficulties in recruiting skilled labor are becoming a hindrance to business, and entrepreneurs are increasingly seeking government measures to help retain workers and provide incentives for the return of the diaspora". MONITOR
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