The price level indices (PLIs) presented in this article have been established within the framework of the European Comparison Programme* (ECP), where 37 countries are participating in price surveys of household goods and services. These surveys are carried out by National Statistical Institutes (NSIs), co-ordinated by Eurostat. This article focuses on 2006 PLIs for countries of the Western Balkan region, and on a selection of major components of actual individual consumption.

Four Western Balkan Countries (Albania, Bosnia-Herzegovina, Montenegro and Serbia) and two EU Candidate Countries (Croatia and the Former Yugoslav Republic of Macedonia) participated in the ECP through the Community assistance on Reconstruction, Development and Stability (CARDS) regional project on statistics. Data for one additional EU Candidate Country, Turkey, have been added as well as a set of seven “neighbouring” EU Member States (Austria, Bulgaria, Greece, Hungary, Italy, Romania and Slovenia) to complete the picture of the region.

Indices presented in this article follow the concept of “actual individual consumption”; it means that PLIs refer to the total value of the individual consumption expenditures by households, non-profit institutions serving households (NPISHs) and general government. The indicators related to this concept are based on individual goods and services that households actually consume. PLIs provide a comparison of the countries’ price levels with respect to the EU average (EU27 = 100): if a price level index is higher than 100, the country concerned is relatively more expensive than the EU average and vice versa. Note that many (mostly Western and Northern European) countries are not included in this publication; therefore the EU27 average may appear high compared to the average of the analysed countries. Data for all countries can be found on Eurostat's website.

Chart 1 presents PLIs for a basket of goods and services related to total actual individual consumption for 2006 for 14 countries. Chart 1 shows that the four Western Balkan countries (WBCs) form a quite homogeneous group with PLIs within a relatively narrow range (45 – 50% of the EU average). Disparities in the PLIs between the EU countries of this region, however, are remarkable and lie between 38 (Bulgaria) and 106 (Italy); it means that the total “basket” of goods and services in question is nearly three times more expensive in Italy than in Bulgaria. As can be seen from subsequent tables and charts, the (low) PLIs for services contribute to a significant degree to the magnitude of the total PLI. In the following sections selected major components and aggregates of actual individual consumption are grouped in order to offer a manageable analysis of the pattern of PLIs across countries. Within each “group” (WBCs, EU Candidate Countries and EU Member States) countries are sorted in alphabetic order based on their country code.

Table 1 presents indices for typical “every-day” consumer goods. Apart from tobacco all indices contained in Table 1 for the WBCs are clearly higher than those presented for the total of actual individual consumption (Chart 1), i.e. these components of consumption are relatively more expensive than the total basket. The PLI for food shows little variation between the WBCs and is at a similar level as those of the EU Members Hungary and Romania. Non-alcoholic beverages turn out to be relatively more expensive than food in Albania and Bosnia-Herzegovina; for Albania the PLI recorded for non-alcoholic beverages is almost approaching the EU average level (=100%).

For the four WBCs, as well as the Former Yugoslav Republic of Macedonia and Romania, the PLIs for tobacco are by far lower than those for food and beverages. To a certain extent the differences in the PLIs for tobacco reflect different national regulations and tax regimes in the Western Balkan region. The Candidate Countries Croatia and Turkey have price levels for tobacco approaching those of some EU Member States. Turkey shows a very high PLI for alcoholic beverages (175%). Generally, Croatia is the most expensive of the six highlighted countries and also more expensive than several EU Members (Bulgaria, Hungary, Romania, Slovenia), whereas the former Yugoslav Republic of Macedonia is the cheapest.

Table 2 includes indices that are based to a large extent on prices for goods that are particularly determined by their brand and model (e.g. motor cars, household durables) or shop chain (e.g. men’s and women’s clothing). In general the PLIs for Clothing and footwear and Personal transport equipment for the 4 WBCs are much closer to the EU average than the PLIs for food and beverages presented in Table 1. Montenegro and Croatia form a cluster together with Austria, Greece, Italy and Slovenia, where clothing and footwear is more expensive than the EU average, again the former Yugoslav Republic of Macedonia showing the lowest prices. Apart from Turkey (with 132%), the PLIs for Personal transport equipment are quite homogeneous, ranging from 78% (Slovenia) to 105% (Serbia). Typically, price differences for transport equipment reflect differences in custom duties (where applicable) and taxes. PLIs here show often an inverse pattern than the overall level, lower income countries appearing more expensive than high-income countries. For example, we notice two of the four WBCs, Serbia (105%) and Bosnia-Herzegovina (102%) with a PLI slightly above EU average - in the same cluster as Austria (104%) and Italy (101%). Regarding Household furnishings, equipment and maintenance all four WBCs as well as the former Yugoslav Republic of Macedonia fall in the same cluster with a price level of around 60 - 70% of the EU average. Various EU Member States (Hungary and Romania) and Turkey join that cluster. Croatia is clearly more expensive (85%) and has the same price level as its neighbour Slovenia.

The aggregates presented in Table 3 refer to a variety of services. Due to the rather complex nature of services a comparison is more complicated than for goods:

Housing, water, electricity, gas and other fuels covers a mix of services (housing) and non-durable goods (energy) and divides the four WBCs into two clusters: Albania and Montenegro have a similar comparative price level to Croatia, Hungary, Romania and Turkey. Bosnia-Herzegovina and Serbia join a cluster with Bulgaria and the Former Yugoslav Republic of Macedonia which is the cheapest country in that respect.

For Health and Education, Albania records the lowest PLI (20%) within the WBCs, similar to the Former Yugoslav Republic of Macedonia and the EU Member State Bulgaria. The dispersion of PLI is huge and reflects, besides market developments and peculiarities of the products in the basket (e.g. pharmaceuticals), to a large extent the different salary costs in the related sectors. The range of PLIs goes from approximately 20% (Albania) to around 120% (Italy); in other words: health and education is six times more expensive in Italy than in Albania.

Communication offers a specific pattern: with the exception of Albania the WBCs show PLIs below 50%, which is remarkably lower than all neighbouring countries. Albania’s PLI of 90% reaches a similar level as Austria, Bulgaria, Hungary and Romania. Croatia and the former Yugoslav Republic of Macedonia can be found in a cluster with Slovenia showing PLIs of about 75% of the EU average.

The PLI-patterns of Recreation and culture and Restaurants and hotels are generally quite similar. The four WBCs have indices within a range of roughly 50 - 60% of the EU average. For restaurants and hotels the Former Yugoslav Republic of Macedonia is cheaper than that group with an index of 43%, only EU Member Bulgaria falling below (35%).

On the other hand, Croatia is the most expensive country of the Western Balkan region with PLIs in Table 3 of around 80% of the EU average (exception: Housing, water, electricity, gas and other fuels).