TIRANA, Feb. 9 – Albania’s inflation slightly accelerated to 1.3 percent in January 2014, hitting a 12-year low for the first month of the year and remaining below the central bank’s lower target limit of 2 percent for the fifth month in a row, hinting sluggish demand and private investments.
The last time the inflation rate was at a similar rate for the first month of the year was in January 2006 at 1.4 percent and in January 2003 at -0.1 percent, according to INSTAT.
In December 2014, the consumer prices rate hit a three-year low of 0.7 percent, sparking deflation concerns considering the central bank’s inflation target of 3 percent which is estimated to positively contribute to economic growth.
Educational services registered the highest annual growth of 11 percent in January 2015 following a hike public universities fees last October.
Alcoholic beverages and tobacco were up by 4.6 percent fuelled by 6.4 increase in cigarette prices due to higher excise duty.
Communication prices were up by 3.8 percent while “other goods and services” rose by 2.9 percent.
The biggest price declines were reported in the health and transport groups.
The health group registered a 5.2 percent annual decline in January 2015 due to a 6.6 percent drop in medical prices and a 4.7 percent decrease in hospital services. The decline is a result of the lift of the 10 percent VAT on medicines and health services since April 2014.
The declining oil prices also had an impact on transport whose prices dropped by 3.7 percent year-on-year.
Food and non-alcoholic beverages, the most important item in the consumer basket, was up by 2.1 percent year-on-year in January 2015 and had a major 0.88 percentage point contribution to the consumer price increase last January.
Meanwhile, the Eurozone deflation gathered pace in January climbing to -0.6 percent, up from 0.2 percent last December fuelled by an 8.9 percent drop in energy prices
Albania’s central bank says that from a macroeconomic point of view, the low levels of inflation rate continue reflecting mostly the presence of non-utilized production capacities, which dictate slow growth in labour and production costs. “In addition, the low inflation rate has also been influenced by declining inflation in partner countries, expectations for low inflation rates as well as low liquidity pressure on the economy.”
The central bank expects inflation rate to range between 1.1 to 3.7 percent in the next four quarters.
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.
“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.
The low levels of inflation rate have been accompanied by slower growth in the past three years.
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.
