Albanian inflation trending upward

Annual inflation of Albania fluctuated around 1.9 percent in 2015, trending upward during the last quarter, Albanian Daily News reported on Monday.

Slow growth of inflation reflects the presence of the negative output gap, the low prices of raw materials of imported inflation as well as stable inflation expectations.

Economic activity has been improving.

According to Albanian Statistics Institute (INSTAT), economic growth of Albania resulted 2.98 percent for Q3 and it is estimated at 2.7 percent for the first nine months of 2015.

The service and construction sectors are the main drivers of growth in production. On the demand side, economic growth is sustained by the expansion of investments and the improvement of the balance of foreign exchange.

Consumption of public administration continues to be weak, thus reducing growth for the third consecutive quarter.

Higher growth rates have not been able to absorb the spare capacity in the economy and the economic activity remains below the potential.

A similar trend is expected to persist even in 2016. Thus, inflationary pressures from the domestic economy will continue to be weak, together with the low prices of commodities and low inflation rates in the trading partner markets.

The impact of these factors is expected to curb as the situation in the Albanian economy and foreign markets improves. In such conditions, the transmission of the monetary stimulus toward the economic growth will be more complete, ensuring the return of inflation to the target of the Bank of Albania in 2018. Endit