Budgetary expenditures for pension scheme declining after pandemic, lowest in the region

The number of people benefiting from the social security scheme has increased significantly in recent years, but on the other hand, budget expenditures in relation to GDP for pension payments are on a downward trend after the pandemic.

Official data from the Ministry of Finance shows that budget spending on the pension scheme reached 7.4 percent of GDP last year, a level similar to 2023 and the lowest level since 2014.

While budget spending on social security as a share of GDP declined, the number of beneficiaries in the scheme increased by 20% between 2014 and 2023.

From around 4.8% of GDP at the beginning of the transition, budgetary spending on the public pension scheme reached 6% of GDP in the early 2000s, to mark a gradual increase after 2010, reaching 7% in 2013 and then peaking at around 8.1% in 2020, when the pandemic increased the pension and temporary benefit bill. The weight has slightly decreased to around 7.4–7.5% of GDP in 2023-2024. (see chart below).

Albania's spending on the pension scheme relative to GDP is much lower than in other Western Balkan countries. Except for Kosovo and Albania, all other countries spend more than 10% of their GDP on pension payments.

Data from the Ministry of Finance shows that Albania has a steady but still moderate increase in social security spending compared to its neighbors. On the one hand, the government has an advantage of greater fiscal sustainability, but on the other hand, low social benefit payments are not favorable for a labor market that is being emptied by emigration and is rapidly aging.

This year Bosnia and Herzegovina (FBiH) implemented the legal indexation formula based on inflation and GDP growth, increasing pensions by 4.49% in 2025.

During this year, Kosovo applied the largest pension increase of 20%.

Montenegro decided that by 2025 no pensioner will receive less than 450 euros per month.

North Macedonia switched from indexation to a fixed supplement, easing low and average pensions.

Serbia is providing the 13th pension by dividing it into equal monthly allowances to maintain purchasing power until the next increase according to the Swiss model.

In Albania, the last indexation (4.1 percent) was in October 2024, while the government has distributed a one-time bonus of 25 percent of the average pension this year./ MONITOR