Albania Economy – fight against informality

Action against informality in Albania Economy will not reduce consumption


Albania economy

Minister of Finance Shkelqim Cani

Ministry –  2.5% inflation that the government had anticipated was not confirmed, instead but proved only 1.3%. This difference gave effect to income.

Taxes –  “From 100 lek more on the economy from rising prices, the VAT is 20 Lek. In fact, the increase was only 50 Lek and VAT, 10 Lek.

Bank –  According to the governor of the Bank of Albania, Gent Sejko, “the average inflation in 2015 is expected to fluctuate around the level of 1.9%”.

Gent Sejko

Governor of Bank of Albania, Gent Sejko

Low inflation affects the revenue decline, but the consumer benefits from lower prices. This is the explanation provided by the Minister of Finance, Shkelqim Cani. An estimated budget of over 2 billion Lek lost only by the decline in inflation in the first six months of 2015. Mr.Cani answered reporters a day after signing the agreement with the Swiss government to grant a support program for public debt management. When asked whether action against informality could reduce consumption, he gave a different answer from the Bank of Albania. Minister Cani believes that the payment of bills reduced private consumption. And on the other hand increased budget revenues and increased consumption in the form of public expenditure of the government. That led at 2.82 per cent growth in the first quarter. Bank of Albania stated that the payment of overdue energy bills lowered consumption of the population. However, minister Cani admitted that at the moment inflation is a problem. Currently, the level of 1.3%, according to him, is far from target. Bank of Albania hosts a fluctuation about 3% by the end of 2017-s. Minister Cani was asked about the new Eurobond worth of 300-500 million euros that the government had planned to issue in September.  He said that currently the market conditions are not favorable. But the deadline for this action is up in November 2015.

The effect of inflation in Albania Economy

In his speech at the opening of the operation against informality, two days ago, Minister Cani said that 2 billion ALL missing due to rising inflation lower. “Inflation had anticipated that it would be 2.5%. Not confirmed the price increase that we had anticipated as a result of better development of the world economy. It proved only 1.3%; This difference gives us little income”, said Cani. For clarification of the public, Cani took an example. “If we had calculated that we had 100 lek more in the economy from higher prices, but VAT was imposed on 100 Lek will give 20 tax for fiscal authorities. In fact, it proved only 50 Lek. And well, that was not raised prices! Implemented 20% VAT on 50 Lek (no more than 100 lek), gives only 10 and not 20 Lek, revenues fell only from its effects”, explained Cani

The Governor of Bank of Albania

A day earlier, the governor of the BOA, Gent Sejko, reported on monetary policy. “Inflation fell slightly in July, due to the reduction in prices of fresh seasonal foods” he said. The decline in inflation of these products during the summer months are related to the growth of agricultural production in this period. Therefore, this factor is expected to have a transitional effect in Albania Economy. Prices of other items of the consumer basket has not changed significantly said the Governor. According to Sejko, the impact of these factors will continue to be present in the short run. “The average inflation during 2015 is expected to fluctuate around the level of 1.9%. However, our medium-term inflation expectations have not changed. Inflation will continue to rise further. And over the next two years and will be back steadily in our target of 3% by the end of 2017 promised Sejko.

Agreement with Switzerland 

Ministry of Finance and the Swiss government sign agreement on financial assistance of 450 thousand dollars for the project. “Maintaining macroeconomic stability is ranked at the top of the list of priorities of the government”, the minister said.”Debt and cash management will be improved with new electronic systems,” Cani said. Ambassador Christoph Graf said that reporting of accurate data on debt, paves the way for a better management and decision-making.

Inflation –  Inflation is rising prices. To assess the stability of prices in Albania Economy, the Bank uses the Consumer Price Index.

Objective –  The objective of the Bank of Albania is to maintain price stability. Bank of Albania intends that the annual increase in consumer prices in the country to be at 3%.