Domestic agricultural production reduces inflation rate to 1.2%

TIRANA, Sept. 9 – A decrease in food and alcoholic beverage prices, which was mainly a result of the domestic agricultural production at its peak, positively contributed to the inflation rate in August 2013 which at 1.2 percent registered a 17-month low. INSTAT data show ‘food and non-alcoholic beverages,’ which is the main component of the consumer price index, rose by 2.8 percent in August 2013, down from 4 percent last July and 4.2 percent in August 2012.
Back in August 2012, the inflation rate was up by 2.8 percent year-on-year.
In early 2012, inflation rate registered 0.6 percent in February and 1 percent in March, raising concerns among experts that Albania was heading to a deflationary situation with negative impacts to the country’s economy which suffered a slight shrink in the first quarter of last year.
Year-on-year, alcoholic beverages and tobacco prices rose by 3.9 percent and the ‘hotel, coffee and restaurant’ index by 1.8 percent in August 2013. Garment and footwear prices dropped by 3.4 percent while rental prices were down by 2.3 percent.
INSTAT data show that compared to July 2013, ‘food and non-alcoholic beverage prices’ dropped by 0.4 percent. The biggest drop was registered in the fruit subgroup with 2.8 percent. Diesel prices in August 2013 rose by 0.8 percent, while petrol prices were down by 0.3 percent compared to the previous month.
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 itself 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.
Low inflation pressures have allowed the Bank of Albania to cut the key interest rate by 1.75 percentage points to a historic low of 3.5 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.