Inflation rises to 2.7%

TIRANA, Aug. 6 – On an upward trend since the beginning of this year, inflation rate registered its highest rate for this year in July 2012 when it climbed to 2.7 percent year-on-year, coming closer to the Bank of Albania 3 percent target which has been set as the ideal rate keeping the economy growing. In July 2011, inflation rate stood at 3.6 percent only 0.4 percent below the Bank of Albania’s maximum target. Domestic agricultural production continues contributing positively with prices in the “vegetables including potato” group down by 2.1 percent compared to last June.
Meanwhile, diesel and petrol prices rose by 2 percent and 0.7 percent respectively.
Year-on-year INSTAT data show drinking water prices registered the highest 21.8 percent increase in June 2012, followed by fruit prices at 8.9 percent and “milk, cheese and eggs” at 4.1 percent. Food and non-alcoholic beverages, the main contributor to the Consumer Price Index, rose by 2.7 percent in June 2012.
Garment and footwear prices dropped by 2.3 percent.
Medicine prices, which since early 2011 are being imposed a 10 percent VAT, are reported to have undergone a 3.6 percent increase year-on-year.
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. 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 1.25 percentage point to a historical record low of 4 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.