Food and non-alcoholic beverages made the largest contribution to annual inflation, adding 1.18 percentage points, followed by housing, water, electricity, gas and other fuels, which contributed 0.83 percentage points.

Transport recorded the largest annual price increase, at 8%, followed by recreation, sport and culture at 6%, insurance and financial services at 4.5%, and housing, water, electricity, gas and other fuels at 4.1%.

Food and non-alcoholic beverage prices rose 3.5% year-on-year, while furniture, household equipment and routine household maintenance increased 3.3%.

Clothing and footwear prices fell 1.8% year-on-year, while prices in the information and communication category declined 0.9%.

On a monthly basis, transport prices recorded the largest increase, rising 4.7% from June. Housing, water, electricity, gas and other fuels rose 0.6%, while recreation, sport and culture increased 0.4% and furniture and household equipment rose 0.3%.

Food and non-alcoholic beverage prices, meanwhile, fell 0.5% month-on-month in July.

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The Governor of the Bank of Albania Gent Sejko said that the projection takes into account the expectations of a more balanced trajectory of aggregate demand and supply for goods and services, higher exchange rate stability, and further decline in inflation across Albania’s trading partners.

Sejko said that the consumer prices slightly declined in the first two months of 2025, averaging 1.9%. The fall in inflation rate was driven by the volatility in unprocessed food prices and a reduction in energy prices for households. On the other hand, the inflation of other consumer basket items remained relatively stable.

According to Sejko, in addition to the inflation decline, the Albanian economy is expected to grow at a stable pace, close to its potential in the medium term.

Sejko underlined that the balance of risks surrounding these projections currently appears neutral.

“However, heightened geopolitical tensions and the potential rise in trade barriers and tariffs could result in a supply shock with negative consequences for economic growth and inflation,” he concluded.

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INSTAT’s latest Consumer Price Index showed on Tuesday that the price surge has slowed down since the COVID-19 pandemic and the military aggression on Ukraine.

“The annual consumer price index change is 1.9% in September, significantly down from 4.1% during the same period of the previous year. On the monthly basis, the price index fell 0.6% from the previous month of August,” INSTAT said.

According to INSTAT, the annual increase in prices was mainly driven by the food and non-beverage group by 0.94 percentage points, followed by the rent, water, fuel and energy group with 0.30 percentage points.

On annual basis, the price increase for the food and non-beverage group was 2.7% compared with the same period of the previous year.

Meanwhile, prices of the vegetables subgroup, including potatoes, rose 6.5%, followed by fish and seafood prices with an increase of 4.6%, milk, cheese and eggs group prices increased 3.9% in September 2024.

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The country’s inflation rate is significantly down from 4.7% during the same period of the previous year. According to INSTAT’s consumer price index (CPI), the monthly CPI change in May was -0.2%.

The country’s inflation has fallen below the Bank of Albania’s 3% target.

The annual price increase has been mainly driven by the furniture, home appliances and house maintenance group and the entertainment and culture group, increasing by 3.7% respectively, clothes and footwear with their CPI increasing by 3.2 %, alcoholic beverages and tobacco group rising 3.1 %, hotel, cafés, and restaurants group with 2.4 %, rent, water, fuel and energy, and education service by 2.2% respectively, food and non-alcoholic beverages up by 1.9 % etc.

Meanwhile, prices of the vegetables subgroup, including potatoes, rose 4.6%, followed by fish and seafood prices with an increase of 4.1%, milk, cheese and eggs group prices increased 3.6% in May, 2024.

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According to INSTAT’s consumer price index (CPI), the monthly CPI change in April was 0.2%.

According to INSTAT, Albania hit the lowest inflation rate since October 2021, prior to a price spike in the wake of the pandemic and the Russian invasion of Ukraine, when the inflation rate surged to over 8% in 2022.

The country’s inflation has fallen below the Bank of Albania’s 3% target.

The annual price increase has been mainly driven by the entertainment and culture group with its CPI rising 4.4% year-on-year in April, followed by the furniture, household goods, and house maintenance group with prices increase by 3.4 %, clothes and footwear with their CPI increasing by 3.4 %, alcoholic beverages and tobacco group rising 3.3 %, hotel, cafés, and restaurants group with 3.2 %, rent, water, fuel and energy by 2.3 %, education service by 2.2 %, health by 1.7% etc.

Meanwhile, prices of the vegetables subgroup, including potatoes, rose 5.4%, followed by fish and seafood prices with an increase of 5.2%, milk, cheese and eggs group prices increased 3.6% in April 2024.

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Central bank Governor said that the fall in inflation has been at a relatively broad base across various items of consumer basket.

Nevertheless – Sejko went on saying – the declining pace slowed down in the third quarter, while price inflation of services, rent and durable goods showed overall stable, by exhibiting both the high demand and the increased production costs in Albania.

“From the macroeconomic perspective, inflation declined on the back of the reduced imported inflation, while domestic inflationary pressures – though trending downwards – appear more stable,” Sejko said.

According to Sejko, “the reduced imported inflation reflected the stability of prices in international markets and the appreciation of lek exchange rate in the last years.”

“By contrast, the fast growth in wages and production costs has dictated the stability in the domestic inflationary pressures,” he added.

According to Sejko, the stabilisation of imported inflation at low rates, a more balanced performance of demand and supply for goods in Albania, as well as the gradual convergence of inflation’s expectations to the target, will lead to the further reduction in inflation over the next quarters.

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“Inflation of consumer prices averaged 4.6% in the second quarter, down by almost 2 percentage points from the previous quarter,” Central Bank Governor said.

According to Sejko, the fall reflected the lower inflation rates of food items, particularly unprocessed foods, coupled will lower inflation rates of non-food consumer goods, particularly of oil. On the other hand, the consumer prices of certain basic food items showed more stability.

From the macroeconomic perspective – he went on saying – the pace of price increase decelerated, mostly on the back of the fall in imported inflation, reflecting the inflation’s downward trend in Albania’s trading partners coupled with the exchange rate strengthening.

“Domestic inflationary pressures continue to appear relatively robust and stable. The relatively elevated demand for goods and services fuelled these pressures. In addition, this demand has been accompanied by a fast growth in both wages and production costs, while maintaining profit margins high,” Sejko said.

Governor underlined inflation is expected to gradually turn to the Central Bank’s target by mid-2024.

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Sejko said that inflationary pressure has been broadening with the inflation rate increase mainly reflected surging prices of food, oil, and transportation.

“Nonetheless, the upswing in prices was present in a large variety of products, reflecting the transmission of supply-side shocks on the other items of the CPI basket as well,” he said.

The governor of the Bank of Albania explained that upward inflationary trend has reflected – to the greatest extent – the impact of the foreign demand shock. However, its spillover in the Albanian economy was favoured by a relatively strong      demand for goods and services and the upward revision of inflationary expectations. The performance of inflation in the future will depend on the dynamics and interaction of these factors.

He noted that the external environment remains challenging.

“The conflict in Ukraine and the sanctions imposed on Russia have engendered a swift upsurge in prices in the global markets, which have started to reflect in slower economic growth rates. In parallel, the financial conditions have been tightening as central banks have increased the policy rates, and the uncertainty across economic and financial agents has remained high. The projections for the Euro area suggest that inflation will peak at the second half of the current year, but the balance of risks remains tilted on the upside,” Sejko said.

However  – the central bank head went on saying – the Albanian economy has shown a sustainable performance in the first half of year.

“The volume of economic activity grew by 6% in the first quarter of 2022, and the indirect indicators suggest a further growth in the second quarter. This performance reflects the sound financial balance sheets of households and enterprises, the operational flexibility of the private sector, and the resilience of the Albanian financial system against shocks,“ he added.

According to him, economic growth was driven by the expansion in households‘consumption, private sector investments, and in the exports of goods and services. On the other hand, the upsurge in prices in international markets has increased the import bill, whereas the fiscal policy has been consolidating.

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