TIRANA, Jan. 11 – Albania’s annual inflation rate slightly accelerated to 1.95 percent in 2015 after hitting a 15-year low of 1.6 percent in 2014, yet standing 1 percent below the central bank’s 3 percent target which is estimated to have a positive impact on the country’s economic growth, according to data published by 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.
Food and non-alcoholic beverage prices, the key item in the consumer basket, increased by 4.3 percent in 2015, with the strongest growth registered after the launch of the nationwide campaign against informality last September, sparking a moderate price increase due to increased costs for thousands of businesses previously operating informally.
Alcoholic beverages and tobacco prices also rose by 5.9 percent year-on-year mainly due to hike in the tobacco excise rate in 2015.
Meanwhile, clothes and footwear prices were down by 1.7 percent, hinting sluggish demand due to increased costs on basic items.
The health and transport groups also registered a moderate decline in prices following the lift of the 10 percent VAT on medicines in April 2014 and a decline in international oil prices.
The inflation rate was at 1.9 percent in 2013, down from 2.4 percent in 2012 and 1.7 percent in 2011. At 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 fueled by the collapse of the pyramid investment schemes.
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 inflation rate allowed the country’s central bank to cut the key interest rate twice in 2015, reducing it to a historic low of 1.75 percent in Dec. 2014, but failing to boost sluggish lending and consumption.
