The Impact of Fiscal Policy on Foreign Direct Investments in Albania

Abstract

Fiscal policy plays an important role in shaping the economic climate of a country, especially when it comes to attracting foreign direct investment. Fiscal policy, which includes the tax system and public spending, is a key factor in creating a favorable environment for foreign investors. In recent years, Albania has implemented reforms that have reduced the rates of profit tax and personal income tax, making the tax system more attractive to investors. These measures, in addition to fiscal incentives for strategic sectors such as energy and tourism, have improved the business climate. Macroeconomic stability is another critical aspect, as a stable economy with low inflation and political certainty helps boost investor confidence. A developed infrastructure and high-quality public services also contribute to the attraction of investments. However, Albania continues to face challenges such as corruption and the need to diversify investment sources. Corruption can negatively affect investor perception and increase operating costs. To maximize its potential, Albania must address these challenges and continue to improve its infrastructure and tax administration. This analysis emphasizes the importance of a stable and predictable fiscal policy to increase foreign direct investment flows and ensure sustainable economic development in the country.