The industry sector as a whole recovered slightly, growing by 0.47% in the second quarter of 2026, after a continuous decline since the last quarter of 2024. However, its main branch, manufacturing, has entered a prolonged recession.
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Manufacturing, represented primarily by processing plants and one of the sectors that led the economic recovery after the pandemic, recorded an annual decline of -1.97% in the second quarter of 2026. The sector has entered its fourth year of decline, and the situation is far from optimistic.
The fall in the euro, restrictions on external demand, and rising costs in the domestic market have sent factories into a free fall.
The decline in manufacturing has become even sharper because of its significant weight within the industry. Industry contributed 10% of GDP in 2025, while the largest part of the sector—around 65%—was accounted for by manufacturing.
Florian Zekja, chairman of the Albanian Manufacturing Association, said that securing raw materials, energy, medical equipment, industrial products and supply chains should be treated as a national priority.
Economic independence, even if only partial, is a strategic necessity. Zekja said history has shown that an economy relying almost entirely on services, such as tourism or construction, without a strong production base, is more vulnerable to crises.
GDP data show that manufacturing experienced a strong recovery after the shock of 2020, with average growth of around 12% in 2021 and 5.5% in 2022. However, after this period, the pace of expansion weakened and the sector entered a continuous decline. In 2025, the sector fell by 1.4%. The downward trend continued in the first two quarters of 2026.
According to Zekja, traditional industrial sectors, including textiles and garment manufacturing, have faced rising labor costs, a shortage of workers and stronger competition from other markets.
Manufacturing alone—excluding extractive industry, as well as electricity, gas, water and waste treatment, which are mainly state-owned—employed around 95,000 people in 2024, the latest year for which data are reported. This represented 17% of total employment generated by businesses.
Agriculture in free fall
Unlike industry, the weakening of agriculture began earlier and has been more persistent. After slight growth in 2019 and 2020, the sector entered a negative cycle, with continuous contraction after 2021.
The sharpest decline was recorded in 2022, when agricultural activity contracted by around 4.8%, while the sector continued to post negative rates in the following years.
The weakening of agriculture is linked to a combination of structural and short-term factors. The sector continues to face population decline and aging in rural areas, a lack of sufficient subsidies and investment in technology and mechanization, as well as difficulties in securing labor.
Rising costs of agricultural inputs, including fuel, fertilizer and livestock feed, have put pressure on producers, while climate change and unfavorable weather conditions are affecting the production of certain crops.
Another major factor is competition from imports and farmers’ difficulties in securing stable access to the market.
Agriculture’s overall share of GDP has continued its gradual decline from around 15.4% a year earlier, affected by weather-related challenges, high production costs, declines in agricultural exports during certain periods and market competition.
Despite the contraction in production, agriculture remains the sector with the highest proportion of informal and traditional employment in the country, providing a livelihood for a considerable share of the rural population and historically accounting for over 35% of total employment.
The economy grew by 3.61% in the second quarter of 2026. However, public administration and net taxes and subsidies accounted for around 70% of this growth, while the real sectors, with the exception of trade, which is being driven by tourism, are going through a prolonged crisis. /Monitor
