Danger from dropped prices

“The low inflation imported from the EU is acting in this situation, together with internal factors, such as the fatigue of the domestic demand and lowered consumption, or other financial and monetary policies in Albania” declared economist Ardian Civici.

Inflation in June dropped with 1.5%, or 0.5% below the minimal objective of Bank of Albania. Although the low price increase might seem a good news for consumers, economic experts say that if this goes on for a long time, there will be troubles for the economy.

“The lowered prices and the inability to sell means a blocked activity for businesses, and new investments are not encourage because they wait for this dropping to stop”, Civici declared.

The Bank of Albania followed an aggressive policy by lowering the interest rate to its historic minimum, but Civici says that stopping the deflation spiral might require the government’s intervention through higher spending.

“We could be a bit tolerant as regards the fiscal stimulations, the public investments and budget policies. Maybe also for the foreign debt, we might give economy a stimulus for not allowing this long low inflation dropping, which could be difficult to recover later”, Civici declared.

The deflation in Europe has turned into the main threat of the economy. The European Central Bank undertook a series of extreme measures two months ago, by installing negative interest rates, but the prices have kept going down, bringing a new crisis from which Albania will not be immune.

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