Oil Prices Surge, Food Keeps Inflation Close To The Target

By Gajtis Bejleri
INSTAT published its latest report on the Consumer Price and Producer Price Indexes on Monday. According to INSTAT, the monthly inflation rate dropped to 4.2 percent in May, compared to a 4.4 reported in April. The CPI counts up to 101 percent of the index of December 2007, with a 1 percent decrease since April. However, Albanians still have to pay more compared to last May, when inflation was three times as low, at only 1.4 percent.
The highest increase in prices was recorded in the oil industry, with 6.1 and 4.3 percent increases in diesel and gasoline prices, respectively, compared to April. Classified under “Transportation”, the oil price increase resulted in a 2.3 percent jump in interurban transport as well, according to the Ministry of Transport. In total, the “Transportation” category increased 1.9 percent, marking a total monthly price increase of 0.1 percent.
However, the inflation rate was kept at bay due to a decrease in the price of food, led by a large drop in the cost to consumers of vegetables and potatoes. Being a seasonal product, vegetables dropped by almost 20 percent compared to April, and 15.6 percent for the year. On the other hand, those goods categorized under “Food and non-alcoholic beverages” showed a slight increase compared to April, with bread and cereals most notably rising by 1.2 percent, while meat, fish and fruits increased by 0.1 percent. Food and non-alcoholic beverages dominated the index as it made up more than one third of the measured products, while showing a monthly 2.8 percent drop in prices, with a downward effect accounting for one percent of the total price change since April.
On the annual scale, however, food and beverages have risen by seven percent, including a dramatic increase of 35 percent in the price of bread and cereals, which accounts for six percent of all goods on the market.
Another significant drop has been recorded in the prices of clothing and footwear, with reductions of 0.3 monthly and 2.6 percent annually.
For the past three months, inflation in Albania has been reported at above four percent, which is the limit set by the Government, the Central Bank and the International Monetary Fund (IMF). The jump from 3.6 to 4.6 percent in prices recorded in March can be compared to that of last August, when inflation rocketed from 2.1 to 4.2 percent.
Aside from the temporary drop, the inflation rate looks to be surging, after INSTAT published the Producer Price Index. According to the report, the PPI rose by 3.3 percent compared to the last quarter of 2007 and by 7.4 percent compared to last May. The major change was observed in the food processing industry, with a huge increase of more than 20 percent compared to the same period last year, and it looks likely to cause a further increase in food prices in the near future.
Yet another factor likely to further shift prices upward is high inflation in Euro-zone countries, as well. This May, inflation hit 3.6 percent in the Monetary Union, the highest since 1996, according to the International Herald Tribune. Though lower than the rate in Albania itself, inflation in such countries as Greece and Italy, the main sources of imports for Albania, might cause a further increase in prices paid by Albanians.