TIRANA, April 8 – Albania’s inflation rate remained at sluggish rates for a second month in row, sparking deflation concerns considering the central bank 3 percent target.
Consumer prices grew by an annual 0.3 percent in March 2016 after hitting a 13-year low of 0.2 percent last February affected by a significant slowdown in food and non-alcoholic beverage prices, the key item in the consumer basket, and lower shoe and clothes, health and transport prices, according to INSTAT.
The transport group registered the biggest annual decline of 4.5 percent in the March consumer prices with oil prices down by 7.3 percent year-on-year.
At €1.15/litre Albania still has one of Europe’s highest fuel prices due to the high tax burden applied on oil.
The country’s central bank has downplayed deflation concerns, saying the situation is mainly a result of a sharp cut in international oil and food prices.
Albania’s inflation rate increased by an average of 0.66 percent in the first quarter of this year, putting at risk the central bank and the government’s expectations of 2 percent for 2016.
Albania’s central bank expects the inflation rate to remain at about 2 percent in 2016 and return to its 3 percent target only by mid-2018.
The disinflation and deflation situation has also affected regional countries and the euro area.
The disinflation situation forced Albania’s central bank last week to cut the key interest rate by another 0.25 percent to a historic low of 1.5 percent in a new effort to boost sluggish consumption and credit.
Albania’s annual inflation rate slightly accelerated to 1.95 percent in 2015 after hitting a 15-year low of 1.6 percent in 2014, yet standing 1 percent below the central bank’s 3 percent target which is estimated to have a positive impact on the country’s economic growth, according to 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 poor growth rates of 1 to 3 percent in the past seven crisis years.
