TIRANA, July 8 – Albania’s inflation rate dropped to 1.3 percent last July, hitting a record low for this year at less than half of the country’s central bank target of 3 percent, hinting poor domestic demand and sluggish consumption.
Lower prices of food and non-alcoholic beverages, the key item in the consumer basket, had a major impact on the inflation last July when they slowed down to 2.4 percent fuelled by a decline vegetable and egg prices.
The biggest annual price increases were reported in the education services with 10 percent, alcoholic beverage and tobacco with 6.6 percent, communication with 1.7 percent.
Meanwhile, the biggest price decreases were reported in the clothes and footwear group with 1 percent and the transport and health sectors with 0.9 percent and 0.8 percent respectively.
INSTAT reports fuel prices continued increasing in July with diesel and petrol prices up by 0.7 percent and 0.9 percent respectively compared to June.
“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. The impact of these factors will continue being present in the short-term,” said central bank governor Gent Sejko in his latest press conference when he announced the central bank had kept its key rate at a historic low of 2 percent for the seventh month in a row.
“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 governor says the return of the inflation rate into the central bank’s 3 percent target will require keeping the key interest at its current historic low of 2 percent for several consecutive quarters.
“A better exploitation of production capacities would support an increase in salaries and the sustainable return of the inflation rate into its target,” said Sejko.
“The progress of the inflation rate continues reflecting the low inflation pressures stemming from the economy’s cyclical weakness as well as low inflation rate in global markets. These factors are expected to be present for several other quarters and inflation rate is expected to range between 1.8 to 2.2 percent in 2015, but is expected to embark on an upward trend in the next two years,” added Sejko.
The Albanian government expects the inflation rate to accelerate to 2.5 percent in 2015 after it hit a 15-year low of 1.6 percent in 2014, hinting sluggish demand and private investments.
Average inflation rate for the first seven months of this year is estimated at 1.77 percent.
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.
