PRESS RELEASE
Questions and answers to the press conference on the Monetary Policy Decision of the Supervisory Council of the Bank of Albania, 5 October 2016

Question: The government has said it intends to raise wages and pensions. How do you think this raise would affect the monetary policy; do you expect inflation and the interest rates to increase? In more specific terms, is there a coordinated plan between the Bank of Albania and the government about this raise?

Governor: The right to raise wages and pensions rests exclusively with the Albanian government. The Bank of Albania has been informed in advance about the government's intention to raise wages and pensions. This increase will contribute to boosting consumption. We have highlighted that the Bank of Albania's accommodative monetary policy alone' aimed at credit, consumption and investments growth is not enough without structural reforms.

In Bank of Albania's view, the raise in wages and pensions would trigger consumption growth. The Bank of Albania, however, is interested in maintaining the macroeconomic balances, decrease of the budget deficit and continuation of fiscal consolidation. The Bank of Albania has not seen the government's plans for the raise in wages and pensions yet; thus, we do not have a final draft of the budget. We will need to look at this draft before we give a more precise opinion and evaluate if the raise in terms of figures would be acceptable, always in relation with Bank of Albania's parameters and objectives: maintaining fiscal consolidation, continuation of the decrease of the budget deficit and decrease of the debt levels. For as long as these parameters are maintained, then obviously the raise in wages and pensions is a right and an attribute exclusive to the Albanian government.

Question: What are your expectations about lending performance by the end of 2016?

Governor: According to available data as at the end of August, cleaned from the effect of written-off loans, credit grew at 2.7% - total loans, including both lek and foreign currency loans. Last year, credit grew by 3%. This year, we expect credit to grow over 3% that is, higher credit growth than in the previous year, always taking into account the write-off effect. .

We are happy to note that the growth of lending is higher in lek than in foreign currency. As I highlighted in my statement, the annual growth of lending in lek in August was 6.9%, against 2.3% growth in foreign currency. This performance confirms the good transmission of Bank of Albania's monetary policy. It also and contributes to financial stability, against the foreign currency exchange risk for the loans performance.

Governor Sejko: Statement to the Press Conference on the Monetary Policy Decision of the Supervisory Council of the Bank of Albania, 5 October 2016