In 2024, Albania’s construction sector contributed 14.4% to the country’s overall economic output, according to Eurostat data—an increase of 0.6 percentage points from 13.8% in 2023.

This figure places Albania at the top in Europe for construction’s share in the economy. By comparison, the average contribution of construction to gross value added in the European Union was just 5.6%—nearly three times lower.

Kosovo ranks second, with construction accounting for 9.8% of its economy in 2024 (down from 10.7% the year before), followed by Slovakia (8.7%) and Iceland (8.4%). In the Western Balkans, after Albania and Kosovo, the highest levels are found in North Macedonia (6.6%), Serbia (5.9%), and Bosnia and Herzegovina (5.5%), while Montenegro has the lowest at 3.9%. Greece ranks last in Europe, with construction making up only 2.2% of its economic output.

Albania’s reliance on construction has been steadily increasing. In 2019—the earliest year covered by Eurostat—construction contributed 13% to the economy. The sector’s growing weight signals a significant dependence on real estate development. When construction comprises nearly 15% of gross value added, any slowdown in the property market or decline in building activity could have a disproportionate impact on employment, fiscal revenues, and overall economic growth.

Moreover, this concentration highlights the lack of economic diversification, particularly in innovative service sectors. It leaves the economy more exposed to cyclical downturns and geopolitical risks.

Construction has long mirrored Albania’s economic cycles. The first boom began after 1999, peaked in 2011, and declined through 2015. A second cycle began in 2017, driven initially by a building surge in the capital and later along the coast. This cycle has yet to reach its peak, as construction permits—especially in Tirana—continue to hit record highs, with new high-rise projects announced almost daily.

Data on wage growth, real economic activity, bank lending, business structure, and actual demand suggest that part of the sector may be financed through informal sources. Since 2014, apartment prices have increased at a rate ten times faster than average wages, making homeownership increasingly unaffordable for the middle class. Today, apartment prices start at €1,500–€2,000 per square meter, while the average monthly salary is around €770.

The significant appreciation of the Albanian Lek further suggests a large volume of informal money in circulation. Since the end of 2016, when the second construction wave began, the euro has depreciated by around 27%—from an average exchange rate of 137.4 lek in 2016 to 100.7 lek in 2024. Yet during the same period, the current account deficit (which reflects foreign currency inflows and outflows) has not seen marked improvement, largely due to high import levels in a country that now produces very little domestically./Monitor/