Page 27 - SE Outlook Regions 2022

The same groups were the chief contributors to the y/y rise in exports;
construction materials and metals added 14.1 pp, mineral, fuels,
electricity 10.8 pp and textiles and footwear 3.7 pp.

For overall imports, minerals, fuels, electricity was the main contributor,
adding 18.7 pp. There were smaller contributions from construction
materials and metals (6.3 pp), chemical and plastic products (4.9 pp)
and other sectors.

2.1.2 Inflation and monetary policy

Consumer price inflation rose sharply during 2021, from just 0.4% at the
beginning of the year to as high as 3.7% in December, as the
international post-coronacrisis recovery gathered pace. High
international energy prices have had a knock-on effect on prices in
Albania.

In December, there was strong upward pressure on the CPI from food
and non-alcoholic beverage prices, which rose by 6.4% year on year to
push the overall annual inflation figure up by 2.22 percentage points
(pp). The fastest growth in prices was for transport, where prices
increased by 9.0% y/y from a low base, contributing 0.48 pp to the
overall rise. Other sectors to experience rapid price growth included
recreation and culture (4.2% y/y), communication and hotels,
coffee-houses and restaurants (3.3% each) and alcoholic beverages
and tobacco (2.1%).

Fast-rising prices have led to protests in Albania by both farmers
concerned about the high costs of fertilisers, fuel and other inputs, and
by citizens fearing high energy and fuel bills.

However, the IMF notes that while headline inflation has risen on
account of higher food and energy prices, core inflation has increased
only modestly, and broader inflationary pressures are subdued.

The Bank of Albania, which also noted the upswing in inflation in the
fourth quarter was mainly due to higher prices of food, oil and electricity
in global markets, anticipates this external shock will keep inflation
above our target in the coming months. However, the bank said, “we
expect demand-supply to re-adjust in global markets, logistic problems
be resolved and energy prices to stabilise. This performance will ease
inflationary pressures and reduce the effect of foreign prices on inflation
in Albania.”

The central bank said that is sees the balance of risks surrounding
inflation appears tilted upside in the short run and balanced in the
medium term. “In one hand, a faster or prolonged increase of prices in
international markets and a slower consolidation pace constitute upside
risks to inflation. On the other hand, slower recoveries of both global
and Albanian economies, due to the prolongation of the pandemic or
upswing of prices in international markets, constitute a downside risk to
inflation,” according to the Bank of Albania.

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