TIRANA, Jan. 10 – Albania’s average inflation rate remained unchanged at 2 percent in 2018, missing Albania’s central bank 3 percent target by 1 percent for the second year in low, hinting ongoing sluggish consumption and negative effects associated with the free fall of Europe’s single currency against the Albanian lek.
Albania had set a 2.7 percent inflation target for 2018 after consumer prices hit a 5-year high of 2 percent in 2017 following a 16-year low of 1.3 percent in 2016, but inflation remained virtually unchanged and both the Albanian government and the country’s central bank now expect inflation to meet its 3 percent target, estimated to have a positive effect on the country’s emerging economy, by 2020.
Household consumption in the first three quarters of this year grew by around 3.4 percent, about 1 percentage point lower compared to the country’s GDP growth for the same period last year, hinting growth fuelled by weather-related electricity exports and higher oil and steel sales following a pickup in commodity prices.
Meanwhile, Europe’s single currency depreciated by around 7 percent against the Albanian lek in 2018, triggering lower inflation pressure in the past few months, due to much cheaper imports, but also negatively affecting savers and remittance recipients in euro.
The 2018 inflation was fuelled by a 2.7 percent hike in ‘food and non-alcoholic beverages,’ the main item in the consumer basket, as well as 2.4 percent increase in the transportation sector following a hike in international oil prices.
Rent, water and electricity prices also registered an average 2.8 percent hike in 2018.
Albania has one of Europe’s lowest consumer prices, but consumption rates are still far below the EU average.
An earlier Eurostat report has shown Albania’s price levels for consumer goods and services are at 50 percent of the EU average, Europe’s second lowest.
When compared to disposable income, price levels, especially for food and non-alcoholic beverages at 73 percent of the EU average, are too high for the average Albanian. The situation is a result of the high level of imports and VAT being applied at an undifferentiated 20 percent rate even on basic food products.
Albania’s 2017 actual individual consumption, a measure of households’ material welfare was at 39 percent of the EU average, the region’s poorest, when expressed in GDP per capita in purchasing power standards (PPS), an artificial currency unit that eliminates price level differences between countries, according to Eurostat, the EU’s statistical office.
