TIRANA, Sept. 8 – Albania’s inflation rate hit an 8-month high last August apparently fueled by the tourism season at its peak stimulating sluggish domestic demand and higher global food and oil prices, according to state statistical institute, INSTAT.
Consumer prices rose by an annual 2 percent last August, putting an end to deflation concerns in early 2016 when inflation rate hit a 13-year low of 0.2 percent, significantly below the central bank’s 3 percent target estimated to have a positive effect on economic growth.
The pickup in inflation rate was fueled by an annual 4.7 percent increase in food and non-alcoholic beverage prices, the key item in the consumer basket. The recovery comes at a time when the FAO food price index tracking prices on international markets of five major food commodity group hit a 15-month high last August affecting Albania as a net importer.
The contraction in transport prices also slowed down to 2.2 percent last August as crude oil prices rose to $50 a barrel, triggering a new hike in local fuel prices, already among Europe’s highest due to the heavy tax burden.
The average inflation rate during the first eight months of this year has been at 1 percent, in a 16-year low fueled by international oil and food prices at record lows, but also sluggish domestic consumption as the economy continues growing between 2 to 3 percent, a small amount for Albania’s stage of development.
The Albanian economy registered a significant recovery in 2015 when the GDP grew by 2.6 percent but consumption turned to negative growth rate and unemployment rates registered only a modest decline.
The central bank says the gradual recovery of the Albanian economy will also lead to a gradual recovery in consumer prices and inflation rate is expected to pick up to its 3 percent target by late 2018. The low inflation pressure has allowed the central bank to cut the key rate to a historic low of 1.25 percent in a bid to boost sluggish consumption, but its easier monetary policy has been poorly reflected as lending continues remaining at modest negative growth rates affected by non-performing loans at about 18 percent.
Albania has one of Europe’s lowest consumer prices but suffers the poorest consumption per capita, according to a report by Eurostat, the statistical office of the European Union.
