Albania has made a notable leap in the ranking of Western Balkan countries by per capita income, but this improvement fades significantly once the cost of living is taken into account.
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The two methods of measuring gross domestic product per capita now present two different pictures of Albania’s economic position.
By the nominal measure, expressed in US dollars, Albania has climbed to third place in the region, behind Serbia and Montenegro, overtaking North Macedonia, Bosnia and Herzegovina, and Kosovo.
In 2025, according to data published by the International Monetary Fund (IMF), Serbia had the highest per capita income in the region at 15.3 thousand dollars, surpassing Montenegro, which ranked second at 14.7 thousand dollars.
Albania has risen to third place, having once ranked second to last in Europe and the region, ahead of only Kosovo.
In 2025, Albania reached a per capita income of 11.2 thousand dollars, surpassing North Macedonia (10.5 thousand dollars) and Bosnia and Herzegovina (9.6 thousand dollars).
Kosovo remains at the bottom, with 7.9 thousand dollars. (See chart: Per Capita Income – USD).
However, the ranking changes when income is adjusted for purchasing power—that is, when it measures how many goods and services can actually be bought with that income in each country.
PPP (purchasing power parity) measures how many goods and services can actually be purchased with income in a country, adjusting for price differences between countries, and is calculated in international dollars.
By this measure, Albania falls to fourth place in the Western Balkans, behind Montenegro, Serbia, and North Macedonia, with a sizeable gap separating it from the latter. According to IMF data, Montenegro retains first place for per capita income (34.4 thousand international dollars), followed by Serbia (32.7 thousand).
North Macedonia ranks third. Although it is one place below Albania in nominal terms, it has much higher purchasing power (29.7 thousand international dollars), compared with Albania’s significantly lower figure (23.4 thousand), followed by Bosnia (22.9 thousand) and Kosovo (20.4 thousand).
The bottom three countries—Albania, Bosnia and Herzegovina, and Kosovo—have similar levels of purchasing power, with a substantial gap separating them from Montenegro, Serbia, and North Macedonia, as clearly shown in the chart: Per Capita Income by Purchasing Power (International USD).
The difference between the two charts is, in fact, one of the clearest indicators of the problem the Albanian economy has created in recent years: income in monetary terms has increased, but much of the benefit has been eroded by the sharp rise in prices.
This is also an indirect indicator of the income inequality caused by the country’s economic model, in which growth driven mainly by construction has created the illusion that the economy has expanded while enriching only a small portion of the population.
The model of recent years, heavily reliant on construction and real estate, has increased the nominal value of the economy and created the perception of a rapid improvement in well-being.
But the benefits have not been distributed evenly, while for a large share of households, higher prices for food, housing, and services have limited real growth in purchasing power and well-being.
As a result, Albania may have climbed the per capita income rankings without seeing a corresponding improvement in its actual standard of living.
Why Per Capita Income Creates an “Illusion”
The nominal indicator must also be interpreted carefully. GDP per capita in dollars is influenced not only by real economic growth, but also by the exchange rate and population size.
In Albania’s case, the strengthening of the lek against the euro and the dollar in recent years mechanically increases the value of the economy when it is converted into dollars.
At the same time, the shrinking population means that the same size economy is divided among fewer residents.
Albania Became Richer on Paper, but More Expensive Even Faster
The difference between Albania and North Macedonia is explained to a large extent by prices. Albania has now overtaken North Macedonia in nominal GDP per capita, but remains significantly behind it when income is measured by purchasing power.
This is because Albania has rapidly become more expensive in recent years, making it the most expensive country in the region overall and especially for food.
In 2015, Albania and North Macedonia were effectively at the bottom of the regional ranking for price levels. Albania stood at 48.3% of the EU average, while Western Balkan countries generally ranged between 48% and 56%.
By 2025, Albania had become the most expensive country in the region, at 72.6% of the European average, overtaking Serbia (68%) and Montenegro (66.1%), countries that had traditionally been more expensive, as well as Bosnia (59.2%).
North Macedonia, by contrast, reached only around 54.8% of the European average. (See chart: How Albania Became the Most Expensive Country in the Region—Price Level Index by Purchasing Power, EU=100).
This change explains why the increase in GDP per capita is not reflected to the same extent in household well-being.
The increase has been particularly sharp for food. Eurostat data show that food price levels alone rose from around 85% of the EU average in 2022 to 99.6% in 2024 and 102.9% in 2025. In other words, a basket of food that costs an average of 100 euros in the EU costs nearly 103 euros in Albania.
In North Macedonia, the same basket costs 74.3 euros; in Montenegro, 84.6 euros; in Bosnia and Herzegovina, 84.6 euros; and in Serbia, 96.6 euros. (See chart: Food Price Index by Purchasing Power Parity).
This is a stark contrast for a country where incomes remain far below the European average. Moreover, food accounts for a much larger share of Albanian household budgets, at around 40%, meaning that higher food prices directly erode purchasing power.
This also explains the “illusion” created by the per capita income chart. Per capita income has increased and Albania has gained ground in the nominal ranking, but prices have risen so quickly that the real benefit to consumers is far more limited.
Albania has become richer in dollar terms, but not to the same extent in terms of what its citizens can buy with that money./Monitor
