The industry sector as a whole recovered slightly with a growth of 0.47% in the second quarter of 2026, after a continuous decline since the last quarter of 2024, but its main branch, the manufacturing industry, has entered a long recession phase.
The manufacturing industry, represented mainly by processing factories, 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 entered its fourth year of decline and the situation does not appear optimistic at all.
The fall of the euro, and the restrictions on foreign demand, together with the increase in costs in the domestic market, have led factories into free fall. The decline in the processing sector is even sharper, due to its high weight within the industry. In total GDP, the industry contributed 10% in 2025, while the largest share of the sector, around 65%, belonged to the processing industry.
Florian Zekja, President 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 partial, is a strategic necessity. Zekja said that history has shown that an economy that relies almost exclusively on services, such as tourism or construction, without a strong manufacturing base, is more vulnerable to crises.
GDP data shows that the manufacturing industry has made a strong recovery after the 2020 shock, with average growth of around 12% in 2021 and 5.5% in 2022. However, after this period, the expansion rates faded and the sector went into continuous decline. In 2025, the sector fell by 1.4%. The downward trend continued in the first two quarters of 2026. According to Zekje, traditional sectors of the industry, including textiles and tailoring, have faced rising labor costs, labor shortages and stronger competition from other markets.
The manufacturing industry alone (excluding the extractive industry as well as electricity, gas, water and waste treatment, which are mainly state-owned) had about 95 thousand employees in 2024 (the last year when data is reported), or 17% of the total employment generated by businesses.
Agriculture in free fall
Unlike industry, the decline in agriculture has been earlier and more sustained. After a slight increase in 2019 and 2020, the sector has entered a negative cycle, with continued contraction after 2021. The strongest decline was recorded in 2022, when agricultural activity contracted by about 4.8%, while in the following years the sector has continued with negative rates.
The decline in agriculture is linked to a combination of structural and short-term factors. The sector continues to face a declining and aging rural population, a lack of subsidies and sufficient investment in technology and mechanization, and difficulties in securing a workforce. Rising costs of agricultural inputs, including oil, fertilizers, and livestock feed, have put pressure on producers, while climate change and adverse weather conditions are affecting the production of some crops.
Another major factor is competition from imports and farmers' difficulties in ensuring sustainable market access. The overall share of agriculture in GDP has continued its gradual decline from around 15.4% a year ago, affected by weather challenges, high production costs, the decline in agricultural exports in some periods, and market competition.
Despite the contraction in production, agriculture continues to remain the sector with the highest percentage of informal and traditional employment in the country, providing a livelihood for a significant portion of the rural population (historically including over 35% of the total employed). The economy grew by 3.61% in the second quarter of 2026. But the main impact on this growth, with about 70%, was provided by public administration and net taxes and subsidies, while the real sectors, with the exception of trade, which is being driven by tourism, are going through a prolonged crisis./Monitor
