TIRANA, Jan. 26 – Annual inflation rate hit a 15-year low of 1.6 percent in 2014, standing 0.4 percent below the central bank’s lower target limit and 1.4 percent below its target of 3 percent, according to data published by the country’s state statistical institute, INSTAT. The situation hints sluggish demand and private investments, the two key drivers of the Albanian’s growth, at a time when the economy has been suffering sluggish growth rates of 1 to 2 percent in the past three years.
The inflation rate was at 1.9 percent in 2013, down from 2.4 percent in 2012 and 1.7 percent in 2011. In the onset of the global financial crisis in 2009, Albania’s inflation rate was at 3.5 percent and slightly accelerated to 3.6 percent in 2010.
The last time the annual inflation rate was lower than 1.6 percent was back in 1999, just a couple of years after the hyperinflation fuelled by the collapse of the pyramid investment schemes, when it hit a negative 1 percent.
Food and non-alcoholic beverages, the most important item in the consumer basket, was up by only 2.2 percent in 2014, registering the lowest growth rate since 2011.
Alcoholic beverages and tobacco prices rose by 7 percent due to 12 percent hike in cigarette prices fuelled by higher excise rates.
Healthcare prices were also down by 4.5 percent after the 10 percent VAT on medicines and health services was lifted in April 2014.
Inflation rate hit a three-year low of 0.7 percent in December 2014, hinting sluggish demand and consumption and deflation risks considering the central bank’s inflation target of 3 percent. “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.
Albania’s central bank estimates that by preserving the inflation rate at around the 3 percent rate, the monetary policy will continue having a positive contribution to the development of the Albanian economy.
The low levels of inflation rate have been accompanied by slower growth in the past three years.
