Albania has made a significant leap in the ranking of Western Balkan countries for per capita income, but this improvement fades significantly once the cost of living is taken into account.

The two ways of measuring Gross Domestic Product per capita today provide two different views of Albania's economic position.
In the nominal indicator, expressed in US dollars, Albania has risen to third place in the region, after Serbia and Montenegro, leaving behind 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, with $15.3 thousand, surpassing Montenegro, which ranked second, with $14.7 thousand.

Albania, which was once the penultimate country in Europe and the region, has climbed to third place, leaving only Kosovo behind.
Albania in 2025 reached a level of 11.2 thousand dollars in per capita income, 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).

But the ranking changes when incomes are adjusted for purchasing power, that is, when it is measured how many goods and services can actually be purchased with this income in each country.
PPP (purchasing power parity) measures how many goods and services can actually be purchased with income in a country, correcting for price differences between countries and is calculated in international dollars.

In this case, Albania falls to fourth place in the Western Balkans, after Montenegro, Serbia and North Macedonia, even with a large difference with the latter. According to IMF data, Montenegro maintains first place in terms of per capita income (34.4 thousand international dollars), followed by Serbia (32.7 thousand).
In third place is North Macedonia, which, although it has dropped one position below Albania, has a much higher purchasing power (29.7 thousand international dollars), compared to Albania which has this indicator much lower (23.4 thousand), followed by Bosnia (22.9 thousand) and Kosovo (20.4 thousand).

The last three countries, Albania, Bosnia and Herzegovina and Kosovo have purchasing power at similar levels, with a significant difference from Montenegro, Serbia and North Macedonia, as clearly shown by the chart: Per capita income by purchasing power (international USD).
The difference between the two graphs is actually one of the clearest indicators of the problem that the Albanian economy has created over the past few years: incomes in monetary value have increased, but a large part of the gain has been eroded by the strong increase in prices.

This is also an indirect indicator of the income inequality caused by the domestic economic model, where growth oriented mainly towards construction has created the illusion that the economy has grown, while only enriching 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 welfare.
But the benefits have not been evenly distributed, and for a large portion of families, the rising cost of food, housing, and services has limited real growth in purchasing power and well-being.
As a result, Albania may have climbed the per capita income rankings without experiencing the same improvement in real living standards.

Why the "illusion" of per capita income is created

Even the nominal indicator should be read carefully. GDP per capita in dollars is affected not only by real economic growth, but also by the exchange rate and population size.
In the case of Albania, the strengthening of the lek against the euro and the dollar over recent years mechanically increases the value of the economy when converted into dollars.
At the same time, population shrinkage means that the same economic size is divided among a smaller number of residents.

Albania became rich on paper, but it became more expensive faster

The gap between Albania and North Macedonia is largely explained by prices. Albania has already surpassed Macedonia in nominal GDP per capita, but lags significantly behind when income is measured in purchasing power parity.

This is because Albania has become rapidly more expensive in recent years, becoming the most expensive in the region, both in total and especially for food.
In 2015, Albania and North Macedonia were practically at the bottom of the regional ranking for price levels. Albania was at 48.3% of the EU average, while the Western Balkan countries generally fluctuated in the range of 48-56%.

By 2025, Albania became the most expensive in the region, with 72.6% of the European average, leaving behind Serbia (68%) and Montenegro (66.1%), countries that had traditionally been more expensive, and Bosnia (59.2%).
North Macedonia, in contrast, only reached about 54.8% of the European average.
This difference explains why the increase in GDP per capita is not perceived to the same extent in the well-being of families.

The increase has been particularly strong for food. Eurostat data shows that for food alone, the price level increased from around 85% of the EU average in 2022, to 99.6% in 2024 and to 102.9% in 2025. So, a food basket that costs an average of 100 euros in the EU, in Albania costs almost 103 euros.
In North Macedonia, the same basket costs 74.3 euros, in Montenegro 84.6 euros, in Bosnia and Herzegovina 84.6 euros, in Serbia, 96.6 euros.
This is a stark contrast for a country where incomes remain much lower than the European average. Furthermore, food accounts for a much larger share of Albanian family budgets, at around 40%, so its price hike directly impacts purchasing power.

This also explains the “illusion” created by the per capita income graph. Per capita income has increased and Albania has gained places in the nominal rankings, but prices have increased so rapidly that the real benefit to the consumer is much more limited.
Albania has become richer in dollars, but not to the same extent in what citizens can buy with them.Monitor