TIRANA, Oct. 13 – Albania’s annual inflation rate accelerated to 2.2 percent in September 2015 when the government launched a nationwide campaign against tax evasion estimated to have caused a price increase because of rising costs for thousands of businesses previously operating informally.
Data published by the country’s state statistical institute, INSTAT, shows the September inflation rate, which still remains below the central bank’s 3 percent target, was fuelled by a 4.9 percent increase in food and non-alcoholic beverages, the key item in the consumer basket which had a 1.94 percentage point contribution to the inflation rate. Within this group, fruit and “vegetable and potato” prices rose by 19.6 percent and 19.1 percent respectively.
Education services registered the biggest 10.5 percent annual increase last September fuelled by a hike in university tariffs. Alcoholic beverages and tobacco prices also rose by 6.9 percent year-on-year with higher excise rates increasing cigarette prices by 9.6 percent compared to Sept. 2014.
Prices in the ailing transport sector dropped for the tenth month in a row as the sharp drop in international oil prices has been partially reflected due to new tax hikes on oil and the depreciation of Albania’s national currency against the U.S. dollar.
Garment and footwear prices also slightly dropped for the eighth month in a row reflecting poor consumer demand as the economy continues struggling and consumption has declined due to the collection of accumulated unpaid electricity bills for thousands of households and a new nationwide campaign to curb tax evasion which has formalized thousands of businesses and closed down thousands of others all over Albania.
Transport and ‘garment and footwear’ prices dropped by 2.5 percent and 2.1 percent respectively in September 2014, INSTAT reports.
Albania’s inflation rate during the first three quarters of this year accelerated to 1.84 percent, up from 1.76 percent during the same period last year.
“From a macroeconomic point of view, the slow increase in prices reflects the impact of sluggish aggregate demand and relatively low prices in global markets,” says central bank governor Gent Sejko.
“Average inflation rate in 2015 is expected to fluctuate at about 2 percent. Forecasts by the Bank of Albania suggest that the inflation rate will continue increasing in the next couple of years and sustainably return to our 3 percent target at the end of 2017,” says Sejko.
The Albanian government expects the inflation rate to accelerate to 2.1 percent in 2015 after it hit a 15-year low of 1.6 percent in 2014, hinting sluggish demand and private investments.
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 Albanian government and international financial institutions such as the IMF and the World Bank expect the country’s economy to accelerate to 3 percent this year, up from around 2 percent in 2014.
