The last time the inflation rate was at 1 percent was in March 2012, when experts warned Albania could be heading to a deflationary situation after the inflation rate had registered 0.6 percent a month earlier, a record low for the past decade
TIRANA, Dec. 10 – At only 1 percent in November 2013, Albania’s inflation rate hit a record low for the 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.
Data published by the country’s state Institute of Statistics (INSTAT) show the annual Consumer Price Index dropped to 1 percent in November 2013, down from 1.7 percent in the previous two months, remaining far below the central bank’s 2-4 percent target band. The last time the inflation rate was at 1 percent was in March 2012, when experts warned Albania could be heading to a deflationary situation after the inflation rate had registered 0.6 percent a month earlier, a record low for the past decade.
The low inflation rate was first of all affected by slowdown in the food and non-alcoholic beverage prices, the main component of the consumer price index, which rose by 2.1 percent year-on-year in November 2013 and garment and footwear prices which dropped by 3.7 percent.
Alcoholic beverages and tobacco prices rose to 3.2 percent in November 2013, up from 1.2 percent last October. The health, transport, and communication indices dropped by 1.6 percent, 1 percent and 1.4 percent respectively year-on-year in November 2013,
The inflation rate which has been on a downward trend since last February continues remaining below the central bank’s 3 percent target, reflecting the moderate consumer demand as also unveiled by the sluggish performance of the value added tax.
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 percentage points to a historic low of 3.25 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.
