Albania: The impact of economic and fiscal policy in the agricultural sector

Abstract

The development of the agricultural and rural sector is and has been throughout the history of the Albanian governments of importance for the economy, employment, but also wellbeing for Albania, given that this large sector currently contributes 18.4% of the country’s Gross Domestic Product and in the labor, market has a share of 36.1% of total employees. Investments in technology and innovative cultivation methods have significantly improved productivity rates over the 30-year period, as well as added value per worker. Growing exports, mainly to the European Union market are constantly increasing and new trade opportunities are emerging for the organized units of the sector. This could make the sector even more attractive for foreign investment. Given the problems that have accompanied the economic model and doing business in the agricultural sector, one of the major challenges for quality development remains the reform of the real estate regime, including agricultural land. This reform process, starting from law 20/2020, which aims to consolidate the property rights over agricultural land, is foreseen to be finalized at the end of 2028. Tax policy affects agricultural competitiveness through its impact on the levels and variability of farm incomes, agricultural workers, land investments and technology, on labor value and other activities related to the sector. Taxes on income, property and land, and capital transfers may affect structural changes, while differential tax rates on specific activities, resources, or use of inputs may affect sustainability. In this regard, in addition to tax policy, regulatory policies have a parallel impact, related to the adoption of farm regulatory practices. Given the great impact it has agriculture on the economy and the sustainability of the rural population, central government and local government stay focused in encouraging agricultural production through interventions towards higher levels of productivity and quality, as well as regulatory and tax policies.