Page 67 - SE Outlook Regions 2024

4.0 Inflation & Monetary Policy
4.1 Inflation & Monetary Policy - Albania
Albania’s inflation rose in 2022 in line with other countries in the region, but more modestly than most. It peaked at 8.3% in autumn 2022, and since then has been gradually declining.
The Bank of Albania expects inflation to return to its target of 3% in early 2025, with a gradual decrease forecast for 2024.
The latest data from statistics office Instat show that the Consumer Price Index (CPI) rose by 3.9% y/y in November, inching up from 3.8% the previous month (chart). Month on month, the CPI dropped by 0.2%.
As in previous months, the main contributor to the annual rise in the CPI in November was food and non-alcoholic beverages. Transport prices continued to decline in both monthly and annual terms.
Meanwhile, Albania’s Harmonised Index of Consumer Prices (HICP) grew by 4.7% y/y in October. The monthly rise in the HICP was 0.1%.
The Bank of Albania raised the base interest rate to 3.25% from 3.00% at the beginning of November.
The central bank said rate increase was required to guarantee the return of inflation to the central bank's target within the next year. Inflation currently hovers around 4% amid tight labour markets.
The central bank noted that high inflationary pressures from the domestic economy remain a risk factor for price stability.
Speaking at a press conference in November, central bank governor Gent Sejko said that despite the challenging foreign environment, economic activity in the country had increased during 2023, while inflation had come down progressively. These positive trends are expected to continue in the future.
“From a macroeconomic point of view, the fall in inflation during 2023 is largely dictated by the fall in imported inflation. This trend has reflected the general stabilisation of the prices of basic products in international markets, the fall in inflation in our trading partners, as well as the strengthening of the lek over the last two years,” Sejko said.
“At the same time, internal inflationary pressures have also decreased, but they continue to remain relatively high and stable. Under these circumstances, the rate of inflation decline slowed down in the third
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