The Albanian government must provide financial support to society’s most vulnerable while scaling back on non-priority expenditures to help the country through this difficult period, according to the Governor of the Bank of Albania, Gent Sejko.
On Wednesday, Sejko presented the bank’s annual report to the Parliamentary Committee on Economy and Finance, stating it is necessary to adopt fiscal policies to support those individuals and businesses most impacted by inflation. This support should be financed by the additional income from price increases and by decreasing non-priority expenditures.
“By doing so, the intervention will be effective but will not harm public debt indicators,” he said.
Public debt in Albania is already between 80% and 86% and is continuing to rise.
His address comes as inflation in Albania reached 6.2% in April, a new record following March’s high of 5.7%. These are the biggest increases in the cost of living since 2001 when inflation reached 7.6%.
Sejko explained that Russia’s invasion of Ukraine has led to a significant increase in commodity prices globally and at the local level. This has caused the cost of living to surge as production costs, transport, energy become more expensive. The war has also created uncertainty in multiple markets and supply chain barriers.
These increases spell rouble for Albania which is already one of the poorest countries in Europe with a third of the population living below the poverty line.
The increase of prices was mainly attributed to food items which increased by 3.56%, then transport with 1.23%. Rent, fuel and energy saw a modest increase of 0.49% while leisure such as hotels and cafés increased by 0.21%.
The governor said that this will further increase inflation and economic growth with slow down. Based on current information, the bank expects the economy will grow in 2022 but will slow down in 2023.
“These projections are based on three important considerations. First, they assume non-escalation of the conflict and continued growth in our trading partners. Secondly, they factorize the solid foundations on which the Albanian economy is after the comprehensive recovery of 2021,” he said.
Meanwhile, the bank’s Consumer Confidence Survey for April fond that most households said their financial situation had deteriorated over the last 12 months. In fact, the number who said the situation got worse, increased by 17% compared to this time last year.