TIRANA, June 9, 2022 – Following global trends, Albania’s inflation has spiked to levels it hasn’t seen in two decades, with official inflation reaching 6.7 percent in May, according to the country’s official statistics entity, Instat.
Inflation was high in April too, but the increase went further in May, especially in areas like transportation — which includes fuel — electricity, food and housing.
Economic experts fear real inflation could actually be higher than official figures show and that it could increase at a higher rate in the months to come. That’s because local production costs rose 17 percent and import prices rose by 10.7 percent in the same period, according to Gent Beqiri, an economic analyst.
“If we look at the index of production costs, there is an increasing trend, that tells us that consumer prices will increase further too. We will see in June, July that that increase will show at higher end prices,” Beqiri told Euronews Albania.
He added: “It’s impossible that we are importing from countries with higher inflation and that we have lower inflation. This tells us that the inflation data in Albania is not accurate.”
On the other hand, the government says it is blunting a hike in electricity prices to families for now, which has helped. However, businesses are facing energy costs that are three times higher than a year ago.
One major concern is the price of fuel in Albania, which is now the highest in the region, at ALL 258 per liter. That’s EUR 2.15 per liter or US$6.44 per gallon. A good portion of the price goes to taxes, which the government says it will not remove because they are vital.
Albania’s central bank is concerned about inflation and it recently increased its key interest rate to 1 percent, but the measure has had little effect. Inflation has also led the central bank to lower economic growth forecasts for 2022.
The only silver lining, experts say, is that the local currency, the Albanian Lek (ALL), has gained some strength against the euro, something that has blunted some of the price hikes coming from imported goods, since Albania does 60 percent of its foreign trade in euros. The euro has dipped below ALL 120, a record low, largely due to an increase in tourism.
While inflation is a European and global phenomenon as central banks across the world created liquidity to deal with the pandemic and the war in Ukraine has put major constraints on food and energy, economic experts are particularly concerned over the most vulnerable in society. The average Albanian monthly salary is EUR 400 / USD 428.
Anecdotal evidence suggests consumers are tightening their belts in response to rising prices and businesses in many sectors are warning they might have to close up shop.
