Indexation is one of those elegant inventions of modern economics that gives inflation the appearance of a civilized process. Prices do not increase, they are simply indexed. Life does not become more expensive, it only adapts to reality. Incomes do not decrease in relation to costs, but the economy is finding its new equilibrium. A soft word, then, for a hard blow.
And we have entered the era of indexation in earnest. In January, the excise tax that affects fuel, alcoholic beverages, tobacco, etc. was indexed to inflation. For oil, this means almost 1 lek more per liter. A technical move, on paper. But like every technical move in Albania, it ends up being corrosive to the citizen's pocket.
The latest in line are mobile phone companies, which are sending customers notifications about new packages that are being indexed to inflation. So, even communication, which until yesterday was a luxury turned into a necessity, officially enters the club of prices that only move forward.
The indexation practice has been included in operators' contracts since 2024 and is now being implemented more widely, with increases linked to the average annual inflation rate. Meanwhile, the Competition Authority has included this issue in its in-depth investigation into the mobile market, where the two main operators control the entire market.
Then come the supermarkets, which don't need official paperwork. They index silently. Today a product costs a little more than yesterday, tomorrow a little more than today, and after a month you realize that you no longer read inflation in reports, but at the cash register.
Foreigners who come to Albania are surprised that prices in supermarkets are more expensive than in their own countries, when they have heard that Albania is cheap. Even agricultural markets have found their own language of indexation.
Products become more expensive because costs have increased. Costs become more expensive because inputs have increased. And so, with a logic that never breaks, everything becomes more expensive and no one is to blame.
Rents, of course, have been indexed as well. Not a little, in fact. Apartment prices as well. The market is adjusting, they say. It is reflecting demand, they add. In short: it is being indexed. In this country, even concrete has learned to keep up with inflation.
And so, from oil to mobile phones, from food to rent, from the market to services, everyone is doing the same thing: they are indexing. Some with a VKM, some with a notification to customers, some with a new label on the shelf, some with a short phone call to the tenant. Everyone has found the formula for how not to call a price increase what is, in fact, an increase in prices.
Only in the end, there remain those who can be fearlessly called the "indexed." Citizens. Those who pay the final price of every "adjustment." Those who absorb every wave of indexation, but who rarely see their income indexed at the same pace.
And this is where irony stops being a literary figure and becomes a statistic. In a decade, Albania went from being one of the cheapest countries in the region, with prices at 48.3% of the EU average in 2015, to the most expensive country in the Western Balkans in 2024, at 70.6% of the EU average, according to official Eurostat data, which measures the indicator by purchasing power parity.
So, we became champions in price indexation, not wages. Albania even left behind Serbia and Montenegro, which historically had the highest price levels in the region.
Meanwhile, salaries have not followed the same pace. On the contrary. According to comparative data, the average gross salary in Albania has remained about 30% lower than in Serbia, Bosnia and Herzegovina, Montenegro and North Macedonia. So, the Albanian citizen is asked to live with increasingly European prices, but with still Balkan incomes, not even the highest.
This is the great paradox of our economy: we are not converging with Europe in welfare, but in the bill. We are approaching the EU not in salary, but in the cash register. Not in productivity, but in the basket. Not in the standard of living, but in its cost.
And yet, these indexed people continue to keep consumption afloat. They continue to buy, pay, postpone the month, fill up on gas, pay for their cell phone plan, rent, food, medicine. They are the ones who, silently, finance the optimism of the statistics and the calm of those who index.
But even this has a limit. Because an economy can index prices indefinitely, but it cannot index consumer patience indefinitely. And when the latter starts to withdraw, when the family buys less, postpones more, gives up some expenses and confines itself to basic needs, then indexed prices are no longer a shock absorber of the crisis.
They return to the first signal that the crisis is entering the heart of consumption. And it is not known how long tourism will compensate for this decline in domestic consumption, which is being held back not only by expensive prices, which are reflecting an uncompetitive economic model, dependent on imports, but also by the massive emigration of the population.
In the end, it may turn out that the only ones who were never properly indexed are the very ones who keep the economy alive. And this, for a country that has raised consumption on the back of growth, could turn out to be a much more expensive boomerang than any indexation./Monitor.al/
