For the first five months of this year, average inflation rate has been at 1.34 percent, far below the central bank’s target of 3 percent reflecting the poor consumer demand
TIRANA, June 11 – Inflation rate slightly accelerated to 1.9 percent in May 2012, after recording levels as low as 0.6 percent earlier this year, according to state statistical institute, INSTAT. In May 2011, inflation rate was at 4.2 percent, exceeding the central bank’s target by 0.2 percent.
For the first five months of this year, average inflation rate has been at 1.34 percent, far below the central bank’s target of 3 percent reflecting the poor consumer demand as also shown by the performance of government revenues.
Year-on-year INSTAT data show drinking water prices registered the highest 21.8 percent increase in May 2012, followed by fruit prices at 10.4 percent and “milk, cheese and eggs” at 5.1 percent. Food and non-alcoholic beverages, the main contributor to the Consumer Price Index, rose by 1.9 percent in May 2012.
Domestic production had a positive contribution with vegetable including potatoes dropping by 4 percent year-on-year. Garment and footwear products dropped by 2 percent last May.
Medicine prices, which since early 2011 are being imposed a 10 percent VAT, are reported to have undergone a 3.9 percent increase year-on-year.
INSTAT reports fuel prices underwent a slight decrease of around 2 percent compared to April 2012.
At an unusual record low for the beginning of the year, and failing to stimulate consumer demand, experts warned earlier this year the Albanian economy was heading to deflation risks. Albania’s central bank itself estimates that by preserving the inflation rate around the 3 percent rate, the monetary policy will continue having 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. 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, on a downward trend since the second half of 2011, have allowed the Bank of Albania to cut the key interest rate by 1 percentage point to a historical record low of 4.25 percent since Sept. 2011 in an effort to stimulate the economy but the moves have been hardly reflected in lower loan interest rates and an increase investments.
