European prices, Albanian wages: the paradox of the cost of living in Albania

Adam Smith had summarized one of the simplest market mechanisms in the 18th century: "The price of monopoly is always the highest that can be obtained; the price of free competition, on the contrary, is the lowest that can be maintained."

Two and a half centuries later, Albania has a problem that deserves precisely this question: how competitive is a market where food, in one of the lowest-income and most agricultural countries in Europe, has become more expensive than the European Union average?

In 2022, the food price level in Albania was around 85% of the EU average. In 2025, the index reached 102.9, almost 3% above the European average.

Within three years, we went from a level significantly lower than Europe, to the most expensive country in the Western Balkans for food.

Serbia remained at 96.6% of the EU average, Bosnia and Herzegovina and Montenegro, at 84.6%, while North Macedonia, among the freest, at 74.3%.

And this happens in an economy where agriculture still accounts for about 14.6% of Gross Domestic Product.

Such a large agricultural base should, in principle, be an advantage for domestic supply and costs and to boost the processing industry.

In practice, about half of food groups cost more than the European average, while milk, dairy products and eggs are over 30% more expensive.

Can the government lower prices? Not in a sustainable way by board, by order, or by a website.

Prices are driven by supply and demand, costs, productivity and competition. Transparency may help consumers compare, but it does not produce more, reduce transportation costs, increase farm yields and create competition where it is lacking.

Milton Friedman's irony also applies at this point: "We economists don't know much, but we know how to create shortages."

His logic was simple. When the price is artificially kept below the market level, supply tends to shrink. So the debate shouldn't be about how to order the price down, but why the price is so high to begin with.

For example, there is a lack of analysis on why dairy products are over 30% more expensive than the European average? Where is the cost created, at the farmer, collector, processor, importer, distributor or retailer?

Why aren't subsidies more strongly targeted at the links in the value chain where efficiency is lost? If the problem is productivity, technology should be supported. If it's collection, we should invest there.

If the scale of farms is very small, organization and cooperation should be encouraged.

Why are product prices in supermarkets more expensive than in countries with much higher wages than ours, surprising even tourists?

Why is the increased demand from the increase in foreign arrivals being met by imports? Why have prices not increased at the same rate in other countries in the region, even though they are small and dependent on imports, as in Albania?

In fact, saying "we need a more competitive economy" is easier in theory than in practice. Because the market is not automatically free just because the state does not set prices.

It is free when there is real competition, easy entry of new operators, equal rules, and institutions that intervene when the market is distorted.

And above all, it takes a willingness to get to the root causes, not just the symptoms that appear on the price tag. Even if all the problems are identified, building a competitive economy is a difficult mission, requiring time and sustainable policies.

The process of adapting to EU standards could make the challenge even more severe. Requirements for food safety, the environment, production, packaging and traceability will increase costs for some businesses.

If domestic producers enter this process with weak productivity and fragile chains, the risk is that the economy will become even more consumerist and more dependent on imports, turning, as producers have often warned, into a large European supermarket.

For now, we have reached one European standard ahead of schedule: food prices. In terms of wages, productivity and competitiveness, Europe is still far behind./ Monitor