Albania’s consumer price index (CPI) inflation shot up to 5.7% in March as the impact of the war in Ukraine was felt in sharp price rises.
Albania had already been experiencing strong price increases in autumn 2021, as energy and food prices rose on international markets. The war has caused a sudden acceleration in inflation, especially for prices of energy and fuel, both of which Albania imports.
The biggest impact on the annual rise in consumer prices came from the food and non-alcoholic beverages category, which comprises a substantial share of Albanians’ consumer baskets, and contributed 3.31 percentage points (pp) to the overall increase.
Another main contributor was transport, which added 1.08 pp, followed by housing, water, electricity and other fuel (0.44 pp), alcoholic beverages and tobacco (0.24 pp) and hotels, coffeehouses and restaurants (0.19 pp).
Compared to March 2021, the steepest price increase was for transport, where prices rose by 19.9%, followed by food and non-alcoholic beverages (9.3%), alcoholic beverages and tobacco (4.9%) and hotels, coffee house and restaurants (4.5%).
Looking within the food category, prices rose fastest for oil and fats, soaring by 22.4% year on year; there have been sharp increases in prices of sunflower oil, as both Russia and Ukraine are major producers and shortages are feared, prompting some governments in the region to restrict exports.
There was also a 15.8% y/y increase in prices of bread and cereals; again, Russia and Ukraine are major grain producers and exporters, and the war and sanctions are anticipated to restrict supplies to the rest of the world.
Other food products whose prices have soared include vegetables by 10.5%, dairy products by 10.3%, sugar, jam honey, syrup, chocolates and sweets by 10.2% and meat by 7.1%.
Month on month, consumer prices rose by 2.4%, with the fastest rises for transport prices (up 8.9% m/m), food and non-alcoholic beverages (3.9%) and alcoholic beverages and tobacco (2.8%).
The Bank of Albania raised the base interest rate to 1.0% on March 23, citing rising inflation following the Russian invasion of Ukraine. Rising prices of food and fuel sparked protests in Albania in the autumn, and they intensified in March.
Albania’s central bank expects prices to remain high at least until the end of 2022, Bank of Albania Governor Gent Sejko said on April 5, according to a central bank statement.
“[I]n our horizon as policy makers – also in the daily economic life of each business and household – a new challenge has emerged. Russia’s military attack on Ukraine and the implemented sanctions led to a sharp upsurge in the prices of foods, oil, energy products and raw materials across international markets,” Sejko said.
“Amid a considerable uncertainty, the available information suggests that prices will continue to remain high, at least, even in the rest of 2022,” he added.