While the economy appears to have been doing better, on the back of infrastructural development, the internal judicial reorganization is leaving Albania in a bit of a bind, according to CMS Partner Besnik Duraj.
“The Albanian economy, much like in other Balkan countries, is not impervious to global macroeconomic problems,” Duraj begins. While initially hopeful for a full pre-pandemic recovery at the beginning of the year, he reports that the Albanian economy has hit a stall, “following the global slowdown and rising inflation.”
However, Duraj expresses notes of optimism. “I believe this is a temporary phase and the numbers indicate so – the Albanian economy has had a significant 18% GDP growth in the second quarter of 2022,” he says. “This improvement is a certain indicator of the recovery from the pandemic GDP drop, which was 10%.” Furthermore, the FDI numbers have improved by 17%, compared to 2021, although Duraj reports that “according to the data from the Bank of Albania, this mainly represents the reinvestments of profits of existing investors, rather than the injection of fresh capital.”
Turning to major projects in development, Duraj reports that the government is focusing heavily on infrastructure. “Apart from major ongoing projects, like the Skavica HHP and the Durres and Vlora harbors, the government is emphasizing infrastructural developments across the board,” he says. “The main project, the “blue corridor,” part of the Adriatic-Ionian Corridor connecting countries between Italy and Greece, is set to include the construction of new highways and reconstruction of existing roads, totaling 110 kilometers, and will require more than EUR 1 billion in investment,” he explains. “Still, the economists fear that the ultimate cost born of this project might get passed down to the citizens themselves, via four different concession projects implementing a toll payment-based financing scheme,” Duraj reports.
Tackling the most important changes to the legal market, Duraj points to an ongoing judicial overhaul process. The High Judicial Council adopted a new judicial map related to the reorganization of the entire judicial branch on a national level – which Duraj explains “means that the number of courts of first instance of general jurisdiction has been reduced from 22 to 13, while the number of courts of appeals went down from six to just one, seated in Tirana.” Whatsmore, the administrative courts also reduced in numbers, coming down from six to two.
“The Albanian Bar Association has provided arguments against this reform, as it considers that this limits the rights of citizens to access justice and that this means a direct breach of human rights,” Duraj continues. “The judicial body didn’t take this into account, and so the National Bar Association decided to boycott the courts, at a national level, for four days.” Duraj further reports that the Council of Ministers is currently in the process of reviewing and approving the change, and the Bar is hoping to influence and change the final outcome.
“The rationale behind the reform has been efficiency and a cost reduction, but if you take out 200-250 judges and prosecutors from the system, a lot of courts will be empty,” he says. With the current efficiency rates of Albanian courts “leaving a lot to be desired, these shrinkages could only lead to further efficiency diminishment,” Duraj explains.
Finally, Duraj reports a potential tax system update. “There is a new draft law that seeks to impose a 15% income tax on self-employed citizens, who currently have a rate of zero,” he says. The rate will be applied “following a deduction of certain operating expenses, which will be different for each industry.”