Challenges for the Energy Sector and the Impact of Energy Inflation on Inflation in Southeast European Countries

The paper analyses the impact of disruptions in the energy sector of the selected countries of Southeast Europe on the resulted inflation in them, as well as the responses of economic policy to these developments. The focus is on the impact of energy inflation on overall inflation. The analysis includes eight countries in Southeast Europe: Serbia, Montenegro, Bosnia and Herzegovina, North Macedonia, Croatia, Albania, Bulgaria, and Romania, for the last five years. The energy sector in these countries has faced many challenges in the past. After the impact of the COVID-19 pandemic in the previous three years, these challenges primarily relate to geopolitical tensions due to the war conflict in Ukraine and to the energy crisis faced by the whole of Europe in the context of Europe's energy war with Russia. These tensions caused changes in the energy sector, hindering the activity of this sector in a selected group of countries and provoking the problem of energy shortages in the region. This happened in different ways, depending on the specifics of each of them in the domain of more straightforward or more difficult availability of energy resources, geographical position, achieved energy security, and political factors. What they all have in common is the impact on the growth of the inflation rate. The paper monitors and analyses the share of energy consumption by the population in these countries’ total consumption. A comparative analysis of the total inflation and the inflation realized in the energy sector in the field of electricity, as well as the weighting of electricity in the CPI index, is performed. Based on that, conclusions are reached about the impact of price volatility in the energy sector on overall price stability in these countries. The challenges faced by economic and energy policymakers in the field of electricity sources are investigated, and certain recommendations for improvements are given from the aspect of impact on inflation.