Prices fall in production and imports, but not in the lives of citizens

In 2025, the Albanian economy faces a clear paradox: import and production prices are falling, while consumer inflation continues to rise.
This contradiction, which at first glance challenges economic logic, is in fact an alarm signal about the structural health of the Albanian market. At its core, it reflects a systemic miscommunication between the supply chain, market structure, and final consumer, reinforced by deep shadows of informality.

Three Perspectives — Indicators telling different stories

1. Import Price Index (IPI)
With an annual decline of -0.4% and a quarterly decline of -0.3%, this indicator clearly shows that global conditions for imported goods have softened. Influences could include drops in energy prices, transport costs, or normalization of markets following recent supply chain crises.
In a small economy like Albania’s, where imports are vital for basic supply, this should translate into lower prices for consumers.

2. Producer Price Index (PPI)
Domestic production prices for the local market showed a slight annual increase of +0.4% but a quarterly decline of -0.2%. This stability signals that local producers are not facing strong inflationary pressures and input costs are stabilizing. However, the slight annual increase indicates internal bottlenecks, potentially from energy, labor costs, or agricultural inputs, without necessarily causing competitive price rises.

3. Consumer Price Index (CPI)
Unlike the two above, consumer inflation rose by +2.3% annually and +0.2% quarterly. This divergence from import and production trends reveals a different reality — Albanian consumers are not benefiting from the easing of costs.

Why aren’t prices falling for the citizen?

In a well-functioning, structured, and transparent economy, falling import costs and stable production prices would naturally translate into price relief for the final consumer. But this is not happening. The reasons go deeper than simple statistics.

Here enters a powerful, informal fourth actor: the informal economy, which accounts for about 30–35% of Albania’s GDP. This invisible and often unaccountable segment breaks the logical price transmission chain in the economy.

How does this happen in practice?
Informal businesses do not set prices based on import or production costs but rather on arbitrary profit and survival logic. They have no fiscal obligations, do not report inventory, and often set prices by speculating on consumer perceptions.

The unprotected consumer pays more, unaware if they are buying from the real market or the informal one. They lack price transparency, effective protection from competition, and are held hostage by an informal market that answers to no one.

Impact on policy and the economy

Bank of Albania policies, designed for a formal financial system and market, have limited effect in a reality where most trade occurs outside this system. Standard inflation control tools — interest rates, monetary interventions — do not reach these parallel channels.

This transmission failure shows that Albania functions with two parallel economies:

• A formal economy, following market signals, international prices, and monetary policy;
• An informal economy, following its own irregular and often opportunistic logic.

If the informal segment is not integrated into a transparent, controllable network, any effort to reduce inflation, support consumers, or increase competition will be ineffective in everyday reality.

What do these indicators tell us about 2025?

Albania’s economy is normalizing costs but not real prices for consumers. Domestic consumption risks slowing down because citizens face prices detached from economic reality.

This situation is not just an economic problem but also social, political, and institutional. A large informal market undermines trust in state institutions, complicates long-term policy-making, and fuels investor uncertainty.

Above all, this market is unfair — it favors those operating without rules while penalizing consumers and honest businesses.

Without formalization, there is no economic justice

In 2025, Albania does not suffer from a lack of favorable macroeconomic conditions but from the lack of reliable interaction between producers, traders, and consumers. This break is built on informality, fragmentation, and weak market regulation.

As long as the Albanian market does not function as an integrated and formal chain, even positive import and production indicators will fail to translate into daily benefits for citizens. The economy may look good on paper, but if the transmission channel from importer and producer to consumer doesn’t work, the data are mere decoration of a distorted reality.

Priority for 2025 Every institutional actor’s priority must be to cut off the informal ground that distorts every economic policy and every effort for sustainable development.