Why is food more expensive in Albania? - Analysis/ Reasons why the depreciation of the euro is not reflected in prices
Imported products in Albania often cost more than in their countries of origin. This is also noticeable when the euro depreciates, as has happened in recent years, where prices in the Albanian market remain static, while in economic logic, if they are purchased cheaper, it should be reflected in the final price.
But why is the depreciation of currencies not felt in the fall in prices? According to an analysis by ALTAX, in practice, the depreciation of the euro often passes almost unnoticed in the Albanian market. Even when the euro/dollar loses value against the lek, the prices of imported products do not automatically fall. The reason is that the final price does not consist only of the exchange rate. Importers and sellers add profit margins, pay for transportation, insurance, customs and taxes, and often also calculate a “risk premium” for delays, inflation or political fluctuations.
Moreover, according to the analysis, the market structure does not allow consumers to easily benefit from exchange rate changes. With little competition and a small market, prices set on the shelf reflect oligopolistic power more than real fluctuations in the euro. As a result, although the euro may weaken significantly, its effect is often lost between additional costs and the control of a few actors over the market. In essence, the depreciation of the euro affects the importer's pocket more than the price paid by the consumer, which often remains unchanged.
When does real economic abuse for imported goods begin? According to the analysis, real economic abuse begins when an unjustifiable difference is observed between the price of the same product in the country of origin and in the Albanian market. A typical scenario is when a product is sold at a retail price of 1.00 euros in Italy and 2.50–3.00 euros in Albania. In this case, the real justifiable cost for the Albanian market is around 1.50 euros, while the real price on the market reaches around 2.80 euros. The difference of around 1.30 euros is not related to transport, taxes or VAT, but represents oligopolistic rents, abusive margins and a real lack of competition.
A determining factor in this process is the structure of the Albanian market itself. Albania operates as a small market, with low purchasing volumes and limited bargaining power. Albanian importers do not buy in massive quantities, but in relatively small volumes, which deprives them of the benefits of economies of scale that characterize large markets such as Italy or Germany. As a result, the total price at which they buy is also structurally higher per unit.
This means that even when the Albanian importer buys at wholesale prices from the distributor or factory, the price difference between the country of origin and Albania does not disappear, but only reduces. Under normal market conditions, just from transport, customs, VAT and standard margins, the final price in Albania can result in about 40–60% higher than the shelf price in the country of origin. This constitutes legitimate structural growth and is economically justifiable for a small importing economy.
The real problem begins when this structural growth is combined with the oligopolistic structure of the import market and abusive growth, which often reaches 120–200%, and is no longer explained by real cost but by the lack of competition.
According to the analysis, real price reduction would be possible if 5 structural conditions were met, such as real opening of the import market; real development of competition in domestic markets; application of differentiated VAT for basic foods; effective functioning of the competition authority; public transparency of prices through comparison platforms.
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