Albania’s rapidly ageing and declining population is becoming one of the biggest risks to its long-term economic growth, the country’s central bank governor said, warning that emigration and low birth rates are reshaping the labour market, inflation dynamics and monetary policy.

According to the 2023 census, Albania’s population has fallen to around 2.4mn — about one-third fewer than in 1990 — while the median age has risen to nearly 43. United Nations projections suggest the demographic decline will continue, eventually inverting the country’s population pyramid.

Speaking at the launch of the European Bank for Reconstruction and Development’s (EBRD) Transition Report 2025-2026 on January 27, Bank of Albania Governor Gent Sejko said demographic change, long overlooked by policymakers, had reached a “global turning point”.

“Fewer people are entering the labour market, while more are becoming dependent on pension and healthcare systems,” Sejko said. “This is already putting pressure on productivity, public finances and long-term growth.”

Albania reflects many of the trends seen across developing Europe, Sejko said, with rapid population ageing combined with sustained emigration of young and working-age people.

Sejko said the shrinking workforce was already contributing to labour shortages, higher wages and rising production costs, while weakening innovation and productivity. These forces were feeding through to inflation, investment and overall economic capacity.

“Population ageing affects both demand and supply,” he said, adding that the economy had so far adjusted by increasing labour force participation, but “at the cost of higher wages and greater inflationary pressures”.

Despite the demographic headwinds, Sejko said Albania’s economy had shown resilience, supported by low inflation, steady growth, rising employment and an improving current account. Unemployment has fallen to historic lows and labour productivity is now well above pre-global financial crisis levels.

He said the central bank’s accommodative monetary policy since mid-2024 had helped anchor inflation expectations, lower borrowing costs and support credit growth, while the banking sector remained well-capitalised and liquid.

However, Sejko warned that negative demographic trends were likely to push real interest rates lower over time, limiting the effectiveness of traditional monetary policy and leaving central banks with less room to respond to future shocks.

The findings for Albania mirror those in the EBRD report, which says ageing populations and shrinking labour forces are weighing on growth across developing Europe.

Sejko said governments would need to respond with politically difficult reforms, including changes to pension systems, labour market modernisation, realistic migration policies and greater investment in healthy ageing, as well as the responsible use of new technologies such as artificial intelligence.