At an average of 1.9 percent in the first quarter of this year, inflation rate remains below the central bank’s target despite an increase in fuel and tobacco prices fuelled by the higher taxes in force since January 2014.
TIRANA, April 8 – After remaining for eight consecutive months below the lower limit of the central bank’s target range of 2 to 4 percent, reflecting the sluggish growth of Albania’s economy, inflation rate jumped above 2 percent in March 2014, showing signs of a recovery in domestic demand.
Data published by the country’s state statistical institute, INSTAT, show inflation rate grew by 2.2 percent year-on-year in March 2014, with food and non-alcoholic beverages having the key contribution with 1.1 percent. The increase in alcoholic beverages and tobacco had a 0.24 percent contribution in the March inflation rate compared to 0.54 percent for the “different goods and services” group mainly as a result of a sharp rise in compulsory motor insurance rates.
INSTAT data shows the biggest annual increases were registered in the “different goods and services” with 11 percent, followed by “alcoholic beverages and tobacco” with 6.8 percent, “food and non-alcoholic beverages” with 2.8 percent. “hotels, coffee bars and restaurants” with 2.7 percent. The biggest annual decreases were reported in the “garment and footwear” group with 3.2 percent followed by communication with 2.8 percent and health with 1.4 percent.
INSTAT also reports diesel and petrol prices dropped 0.3 percent and 0.4 percent respectively compared to February 2014.
At an average of 1.9 percent in the first quarter of this year, inflation rate remains below the central bank’s target despite an increase in fuel and tobacco prices fuelled by the higher taxes in force since January 2014.
The annual inflation rate in 2013 was estimated at around 1.9 percent, down from 2 percent in 2012, but far lower compared to 3.5 percent in 2011 and 3.6 percent in 2010.
At only 1 percent in November 2013, Albania’s inflation rate hit a record low for the previous past 20 months, unveiling the critical situation of the country’s economy which is facing its lowest growth rates in the past 15 year affected by sluggish domestic consumption and private investments.
Albania’s central bank estimates that by preserving the inflation rate around the 3 percent rate, the monetary policy will continue having a positive contribution to the development of the Albanian economy. “This targeted inflation rate and the monetary policy applied for its achievement, positively affects the stability of economic growth rates, as has been proved in recent years,” says the central bank.
“Research has indicated that inflation has a statistical trend of registering positive values. In reality, the target of preserving an unchanged price level, i.e an inflation rate close to zero could correspond to a deflationary situation,” says the Bank of Albania in its 2012-2014 monetary policy document.
Low inflation pressures have allowed the Bank of Albania to cut the key interest rate by 2.5 percentage points to a historic low of 2.75 percent since September 2011 in an effort to stimulate the economy but the moves have been poorly reflected in lower loan interest rates and an increase in consumption or investments.
