Who can stop the price increase?

Prices in the bread market and gastronomy have increased in Kosovo in recent days. Consumer protection organizations, as well as market and economic experts, see the rise in electricity prices as a pretext for raising prices of basic consumer products. Is the price increase justified, are there mechanisms for their supervision, as well as for consumer protection?

The next time you shop at your neighborhood bakery or sit down for a drink at the nearest cafe, be prepared to pay up to 100 percent more than before.

The price of 50 cents for a loaf of bread has already changed in many places in Pristina: in some bakeries bread is bought for 60 cents, and in others for 80 cents. In some cafes and restaurants in the capital of Kosovo, the price of a coffee has risen from 1 euro to 1.5 or 2 euros.

Selatin Kaçaniku, from the non-governmental organization Konsumatori, in Pristina, tells Radio Free Europe that the price hike is being justified by some businesses with the increase in the cost of electricity.

On May 1, the decision of the Energy Regulatory Office (ERO) to increase electricity tariffs by 16.1 percent came into effect for households and small businesses with up to 50 employees.

"Coffee has reached 2 euros. But, for the price of one coffee [today], they have made four loaves of bread. Today they no longer make four loaves of bread, but three loaves of bread. It means: ERO has eaten one loaf of bread for us," says Kaçanik.

He adds that signals for price increases for other basic consumer products already exist, while "the logic of [price increases] is the logic of an avalanche."

On June 1, the decision to increase energy prices by up to 30 percent for large businesses with over 50 employees is expected to come into effect.

Is the price of energy influencing the price increase?
Economists and market experts have different views on whether the increase in electricity tariffs is the real reason for the increase in the prices of products and services.

Ismet Mulaj, former Minister of Trade and Industry in Kosovo, estimates that since mid-April, when ERO decided to increase tariffs, businesses have been afraid of increasing their operating costs.

"Therefore, some businesses, even before the prices [of electricity] have increased, have started increasing the prices [of their products]," says Mulaj, according to whom about 95 percent of bakeries operate on electricity.

The increase in energy prices, according to him, increases the cost of bread production for bakers, who have already started to raise prices. Similarly, says Mulaj, other services whose work depends on electricity are expected to act similarly. Blendi Hasaj, executive director at the GAP Institute for Advanced Research, in Pristina, sees the situation differently.

According to him, Kosovo imports most of its consumer products, and the increase in the price of electricity does not increase the direct cost of products.

"Normally, in Kosovo, the fluctuation of consumer product prices is in line with the change in prices in the markets from which we are supplied, and not to a large extent from indirect costs, such as the cost of electricity," Hasaj emphasizes to Radio Free Europe.

In 2023, electricity tariffs increased by 15 percent. But, according to Hasaj, the prices of consumer products, on an annual average, did not change by more than 1 percent.

They, he says, did not decrease in 2024, when electricity tariffs were reduced by 8 percent.

Who oversees prices?
A market economy with free competition is the basis of Kosovo's economic regulation.

In November 2023, the Constitutional Court of Kosovo found the law on price ceilings for basic products unconstitutional.

The Kosovo government has not responded to Radio Free Europe's inquiry about whether there are any measures or legal mechanisms that could curb or control price increases.

Mulaj and Hasaj agree that the Government cannot intervene in the increase in prices of basic consumer products if it is imposed by the free market.

Mulaj emphasizes that, if prices continue to rise, the Government must find social mechanisms to "help poor citizens and consumers."

"A mechanism is, for example, subsidizing those who cannot afford to pay," Mulaj emphasizes.

Meanwhile, Hasaj considers that the only mechanism for overseeing possible price abuses in the Kosovo market is the Competition Authority. This authority guarantees the "functioning of a free and fair market" in Kosovo.

"The Competition Authority should investigate, it is functional, but it is not fulfilling its role," emphasizes Hasaj.

However, the Competition Authority announced on Wednesday that due to concerns raised by citizens, it "is conducting an in-depth analysis of over 20 basic products, to analyze the reasons for price increases in the Kosovo market."

This body announced that it has begun monitoring the bread market and the gastronomy sector, "with particular emphasis on the increase in the price of coffee", to assess whether the recent increases are in violation of the competition law. /REL