Agricultural subsidies are lacking, agro-processing is underdeveloped

2025-06-14 09:15:00, Ekonomi CNA

Although the agricultural sector accounts for nearly a quarter of the Albanian economy, the sector faces labor shortages, very low subsidies, high fragmentation, and low mechanization.

In 2019, the government reduced the refundable VAT for farmers from 20% to 6%, and then removed these exemptions entirely in 2022, creating difficulties for domestic producers and favoring imports.

This policy has caused many farmers to abandon the cultivation of basic products, livestock and agriculture, as the cost of production is higher than the market selling price.

The situation worsened even further when the European Union blocked funding from the IPARD program with a total amount of 112 million euros, at a time when all countries in the region are benefiting from these funds, especially Serbia.

Albania lags behind the region in both the low level of budget subsidies and the efficiency of funds.

Kosovo and North Macedonia have made great strides towards the European model of support with direct payments linked to performance, production and rural development.

While Serbia is a leader in agricultural subsidies in the region, thanks to its high budget and the priority it gives to agriculture as a strategic sector.

Last year, North Macedonia provided 170 million euros in subsidies for agriculture from its budget, Kosovo around 80 million euros, and Albania only 31 million euros. Albania has a very underdeveloped agro-industrial sector.

Agricultural exports are based on fresh field produce, while we only import tomatoes and pickled peppers or jams from other countries. Even in this respect, Albania remains the country with the most underdeveloped agro-industry in the Region.

Although agriculture is a large sector, agro-industry accounts for about 2.5% of GDP. About 1,500 enterprises operate in this sector, most of which are very small.

In North Macedonia, agroindustry accounts for 5-6% of GDP and has managed to attract investors from Italy and Turkey in the meat, dairy, tobacco, etc. processing sectors.

IPARD schemes have helped North Macedonia in recent years. Serbia is also a leader in the agro-industrial sector, where its share in GDP exceeds 10%.

Serbia is a major exporter of processed food products ranging from dairy, meat and beverages and also has highly developed logistics in industrial refrigeration. In Bosnia too, agro-industry accounts for over 7% of GDP and is mainly focused on industrial products such as meat and dairy.

Albania has high potential in developing agro-processing, especially in fruits, vegetables, wine, olive oil and medicinal plants, but has less processing capacity than any other country in the region. Supportive policies in the agro-industrial value chain are completely lacking.

Without increased investment in processing, export standards, and technological support, Albania will continue to remain an exporter of raw materials and not of value-added products, and consumers will also be exposed to high import prices of these products, said Alban Zusi, who has been operating in the agri-food sector for years./ Monitor Magazine