Inflation in Albania

A short history of inflation in Albania

The Pyramid Schemes (1996 to 1997)

Albania emerged from one of Europe's most isolated communist regimes with almost no financial system, and into that gap came investment schemes promising extraordinary returns. By late 1996 their nominal liabilities were worth around half the country's annual output and a majority of the population had money in them, encouraged by the government's apparent endorsement. They collapsed in January 1997.

What followed was not merely a financial crisis: armouries were looted, the state lost control of much of the country, some two thousand people died and the government fell. Rebuilding monetary credibility took years, and the Bank of Albania eventually adopted an inflation target in 2009. Inflation has been low and stable since, which for a country that lost half its savings inside a month is not a small achievement.

Post-Covid Inflation (2021 to 2023)

In Albania, prices rose fastest in October 2022, at 8.3%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.