Albania is facing food prices higher than the European average! VAT, among the highest in the EU

Albania is facing food prices higher than the European average, while per capita income remains much lower. Weak domestic production, dependence on imports, 20% VAT, fuel and logistics costs are making every link in the chain more expensive. Even though average prices of imported foodstuffs have fallen, this drop has not been passed on to the consumer. The “PriceWatch” platform may increase transparency and competition, but it does not solve the structural causes. Experience from the region shows that lower VAT rates, temporary margin caps and greater support for domestic production are needed.

The government is trying to curb food price hikes through “PriceWatch”, a platform that will allow consumers to compare prices across supermarket chains.

The initiative may increase transparency, help families choose the cheapest alternative and exert competitive pressure on traders, but it does not directly touch the costs that shape the final price.

Behind the price of a food product in our country lies a long chain of factors, from insufficient domestic production, dependence on imports, 20% VAT, high fuel prices, transport, and losses during distribution. During the tourist season, traffic, supply delays and demand that domestic agriculture cannot keep up with are added to this chain.

Data show that the problem cannot be explained only by more expensive goods abroad. In July 2026, according to Eurostat, food and non-alcoholic beverage prices in Albania rose by 3.2% compared to a year earlier, while the average increase in the European Union was only 0.6%.

Food became more expensive in Albania five times faster than the European average. Albania had the highest increase in the Western Balkans, ahead of Kosovo, where food prices rose by 2.7% in July, and Montenegro, with 2.3%.

In Serbia, food prices were 5.6% lower than a year earlier, while in North Macedonia they fell by 0.3%.

This happened at a time when two external factors should have helped ease the pressure: the strengthening of the lek against the euro and the drop in the average price of imported food.

Calculations based on INSTAT foreign trade data show that, in the first seven months of 2026, the average price per kilogram of imports in the “Food, beverages and tobacco” group fell by 6.5% compared to the same period of 2025. However, the prices paid by consumers continued to rise.

This mismatch shows that the pressure no longer comes only from international markets. It is increasingly being created within the country.

Eleni Babameto, who owns one of the largest food import and distribution companies, says that high prices in Albania are the result of a lack of domestic production, the fiscal burden and transport costs.

“We do not have enough domestic production nor a developed food industry, while we have one of the highest VAT rates on food in Europe,” she says.

According to Ms. Babameto, on the other hand, the high fuel price affects every link, from the farmer working the land to the processor, the importer and the distributor supplying the points of sale.

In this situation, monitoring can help identify unjustified differences, but it cannot replace a food policy.

The solution requires a linked package of measures. Alban Zusi, an agriculture expert operating in the agro-industrial field, says that an analysis is needed to identify opportunities to produce the foods we import domestically.

According to him, this is achieved by supporting the entire chain, from production to processing, as the countries of the region have done.

The region, from low VAT to extra market measures

One of the reasons why food prices in our country are very high is VAT. Albania taxes basket products at 20%, just like all luxury or other non-essential goods.

A comparison with the Western Balkans puts Albania in an unfavorable position. Serbia has the same standard rate, 20%, but taxes basic foodstuffs at 10%, according to its domestic tax legislation.

In Kosovo, the standard rate is 18%, while cereals, flour, bread, pasta, cooking oil, milk, dairy products, eggs and salt are taxed at 8%.

Montenegro has a standard rate of 21%, but uses a reduced rate of 7% for bread, flour, milk and dairy products.

In North Macedonia, the standard rate is 18%. Basic foods are taxed at 5%, while some other food categories at 10%. The 5% rate is also used for animal feed and some agricultural materials and equipment.

Bosnia and Herzegovina has no reduced rate, but its single rate of 17% is three percentage points lower than the one Albania applies to food.

But, in addition to lower VAT, the countries of the region have taken extra measures to curb price growth after the pandemic.

After the wave of inflation that began in 2021 and accelerated in 2022 with rising energy and food prices, Western Balkan countries intervened with extraordinary measures to curb the cost of living. Later, especially after 2024, some governments moved towards limiting profit margins, aiming to reduce prices without creating shortages in the market.

North Macedonia was among the countries that intervened most strongly. At the peak of the crisis, in 2022-2023, the government froze the prices of several basic products, such as bread, milk, pasta and eggs.

In February 2025, the measure was changed towards a more flexible model, with profit margin caps of up to 10% in wholesale and retail trade for 73 groups of food products.

Kosovo followed a similar approach with price ceilings for basic basket products. After a sharp rise in prices, the government approved in principle the law on price caps for products such as cereals, flour, cooking oil, eggs and hygiene products.

In parallel, Market Inspectorate controls on the margins of large importers and agreements that could lead to abuses were strengthened.

Montenegro shifted its focus mainly to margin caps. After several interventions during 2024-2025, the government expanded the list of products with restricted prices to over 70 categories, including meat, dairy, oil, flour, vegetables and baby food. Profit margin was capped at 5% for wholesalers and 7% for retailers, while the measures were extended until the end of March 2026.

Serbia initially used a combination of state reserves and agreements with supermarkets. In the years after the crisis, the government intervened with reserves for products like flour and oil, while later promoting campaigns such as “Best Price”, in cooperation with retail chains, to lower the prices of everyday products.

This approach led to a drop in food prices in mid-2026, according to data cited for the region.

In Bosnia and Herzegovina, measures were implemented in a fragmented manner, due to the country’s administrative division. Both entities imposed margin caps on basic basket products. In Republika Srpska, the measures were extended until the end of 2025, with the aim of keeping the prices of the most essential products under control.

Albania intervened mainly in 2022, through transparency boards for basic food and fuel, as well as social packages for the strata most affected by price increases.

But, unlike some countries in the region, there is currently no active broad mechanism for capping profit margins on food products.

Lack of domestic production, a reason for high prices

Consumption and the expansion of tourism have created a larger food market. But agriculture and the processing industry cannot supply stable quantities, with the same standard and in the time required by supermarkets, hotels and restaurants. The gap is being filled by imports.

INSTAT foreign trade data show that, during the January-July 2026 period, Albania imported about 239.3 thousand tons of cereals, 23.1% or 44.9 thousand tons more than in the same period a year earlier. Cereals alone accounted for about 39.5% of the total quantity of imported food.

Imports of vegetables and greens increased by 11.1%. For dairy products, eggs and honey, imported quantities rose by 6.8%, to 21.6 thousand tons. Imports of fruit and nuts grew by 5.1%. The map of suppliers has also changed. Imports from Serbia fell by 15%, while supplies from Croatia and Moldova increased, mainly for cereals.

Imports from Ukraine, North Macedonia and Greece also increased. For meat and exotic fruits, the market turned more towards Brazil, Argentina and Ecuador. The more food comes from abroad, the more the market is exposed to transport, exchange rates, international fluctuations and supply disruptions.

Albania cannot replace all food imports. But it can reduce dependence in categories where it has an advantage, said Alban Zusi.

The greatest potential lies in vegetables, greens and some types of fruit. Vegetable production reached more than 1.44 million tons in 2025, but imports of them increased again by 11.1% in the first seven months of 2026.

Hotels, restaurants and supermarkets demand continuous supply, the same caliber, packaging, certification and invoicing.

Also, in dairy and meat, the potential for increasing production is present if subsidies are provided. The revival of livestock farming requires per-head payments, funding for herd expansion, animal feed production, stables, veterinary services, processing and purchase contracts.

For cereals, the possibility of replacing imports is smaller. Albania does not easily compete with the large areas and mechanized production of Serbia, Ukraine or Croatia. Policy should focus on security of supply, reserves and diversification of partners, not on an unrealistic self-sufficiency goal.

Since 2020, imported food prices have risen by 40%

The average price per kilogram of imports in the “Food, beverages and tobacco” group was relatively stable during the years 2015-2020.

Calculations made as the ratio of imported value to net weight reported by INSTAT show that the average price was 99.63 lek per kilogram in 2015.

Within six years, the price had moved within a narrow band of about 97-101 lek. The sharp shock started in 2021. The average price rose by 16.3%, to 117.96 lek per kilogram. In 2022, another increase followed, this time by 23.9%, bringing the average to 146.12 lek, the highest level of the period.

Compared to 2020, the average cost of a kilogram of imported food, beverages and tobacco had risen by about 44%.

After the peak of 2022, pressure began to ease. In 2023, the average price fell by 11.2%, to 129.77 lek per kilogram. In 2024, it dropped by 6.9%, to 120.85 lek, while in 2025 a slight decline of 0.4% was recorded, to 120.37 lek.

In the first seven months of 2026, the average price was 115.57 lek per kilogram, about 6.5% lower than in the same period of 2025.

But the shock has not been undone. Even after the decline, the average import price remains about 14% above the 2020 level and roughly 16% higher than in 2015.

Part of the delay in the reduction of consumer prices may be linked to long-term contracts, previously purchased stocks and the time needed for transmission along the chain. But the fact that the average import price is falling, while food on the domestic market is becoming more expensive, shows that costs created within Albania have taken on a greater role.

Fuel and costly logistics

The fuel price affects every link of the food chain. The farmer uses diesel for agricultural machinery; the processor pays for raw material transport; the importer covers movement from the port or border point; the distributor supplies warehouses and points of sale.

Currently, a liter of diesel is sold at 219 lek per liter, the highest level in the region and Europe.

Even when the product is bought cheaper abroad, transport from the border to the warehouse and then to retail networks can erode the benefit.

According to Ms. Babameto, logistical shortcomings become particularly noticeable during the tourist season. Trucks supplying coastal areas can stand for hours in traffic. Delays add fuel consumption, working hours and the risk of losses for fresh products.

Companies will also face other costs from the European integration process. Standards for food safety, traceability, storage and transport require investments in facilities, equipment and technology.

These investments are essential for quality, consumer protection and exports. But if businesses are not supported with adequate financing, part of the cost may be passed on to final prices.

High VAT, the EU treats food as a basic need

Food distributors stated that high VAT is the main cause of high food prices. Babameto said that Albania should lower the threshold for basket foods, as the market is now fiscalized and the process is more monitorable.

Albania is not obliged to keep VAT on food at 20% to align with the European Union. On the contrary, the European framework creates room for lower rates.

According to the European Commission and the VAT Directive, member states may use up to two reduced rates, no lower than 5%, for specified categories. The Directive also allows a rate below 5% and a zero rate for a limited number of categories meeting basic needs, which include food.

In practice, most EU countries use reduced rates. Germany applies 7%, France 5.5% for most foods, the Netherlands 9% and Greece 13%. Italy uses differentiated rates of 4%, 5% and 10%; Croatia 5% and 13%; while Poland 5% and 8%, depending on the product.

Luxembourg goes down to 3% for certain categories. Denmark is one of the few exceptions. It does not use a reduced rate and taxes food at the standard rate of 25%.

The most recent example of using VAT as a tool against the cost of living comes from Sweden. From April 2026, the Swedish government temporarily lowered the rate on food from 12% to 6%, with the provision that the measure will remain in force until the end of 2027.

In September, Reuters reported that, according to the assessment of the Swedish Consumer Agency and the National Institute of Economic Research, the reduction had been transmitted to retail prices. The Swedish experience shows two things. First, VAT can be used to relieve families. Second, the reduction must be accompanied by monitoring, so that the benefit passes to the consumer and does not remain in trade margins.

Ms. Babameto said that, for Albania, a general reduction for all foods would also favor, in absolute terms, families with high consumption. The most reasonable alternative would be a limited basket with bread, flour, rice, milk, eggs, oil and other basic products, accompanied by reporting of prices before and after the change.

It is precisely here that “PriceWatch” can take on a real function, not simply to compare supermarkets, but to check whether the fiscal relief reaches the citizen.

European prices, much lower incomes

The Albanian paradox starts with the relationship between prices and incomes. According to Eurostat data for comparative price levels, in 2025, the price index for food and non-alcoholic beverages in Albania reached 103.8, with the European Union average equal to 100.

This means that a food basket that costs an average of 100 euros in the EU costs about 104 euros in Albania. A year earlier, the Albanian level was 99.6% of the European average.

On the other hand, per capita income in Albania remains about 43% of the EU average, while actual individual consumption, an indicator that better reflects the material well-being of families, reaches about 48% of the EU average.

The weight that food has in the budget makes every increase more noticeable. According to the weights published by INSTAT, food and non-alcoholic beverages account for 34.6% of the Consumer Price Index basket.

In July 2026, overall inflation measured by the Consumer Price Index reached 3.4%, up from 2.5% a year earlier. Food contributed 1.09 percentage points, or about one-third of the overall price increase.

The rise in prices is not evenly distributed. A low-income family that spends half its budget on bread, milk, meat, oil, vegetables and fruit is hit much harder than a family where food accounts for only one-fifth of spending.

The gap is particularly noticeable for emigrants who return to Albania and can compare the markets directly.

Ferdinant Xhindoli, from Durrës, returned with his wife after 33 years of emigration in Italy. He says that over the past year he has noticed a continuous increase in prices.

“In a supermarket in Italy, I did about 80 euros worth of shopping. The same products in Albania would have cost me roughly 120 euros,” he says.

According to Mr. Xhindoli, the cost of living could even become an obstacle to the return of emigrants.

“It is said that emigrants should return, but if measures and decisions are not taken as soon as possible, I do not believe many of them can afford to return with these prices,” he says./Monitor