BANK OF ALBANIA
Governor Sejko: Statement at the joint press conference with the IMF Mission Chief and the Albanian Minister of Finance and Economy
Publication date: 06.05.2019
Discussions with the IMF Mission in the framework of the Post-Program Monitoring
Dear ladies and gentlemen,
Let me first thank the IMF Mission for the fruitful discussions we have had over the last two weeks. These discussions take place in the framework of the IMF's Post-Program Monitoring for Albania.
I would like to emphasise also that we share similar views with the Mission regarding the development stage of Albania, the challenges that lie ahead, and the necessary policies and measures for addressing them.
Following, I would like to share with you the opinion of the Bank of Albania on these three topics.
In our assessment, the cyclical position and the overall equilibriums of the Albanian economy have continued to improve. Aggregate demand has expanded - mainly driven by the increase in consumption and private investments - thus contributing to maintaining a positive growth trend and an increasingly fuller utilisation of production capacities. In parallel, the external balances of the economy have been improving, the domestic debt is reduced and the balance sheets of the private sector are stronger.
The growth in employment and wages has triggered a build-up in domestic inflationary pressures. Yet, inflation is still undershooting our target, on account of the exchange rate appreciation and of the aggregate demand that is still insufficient to ensure the convergence of inflation to target.
Domestic financial markets appear calm and adequate to sustain economic growth. Liquidity in the banking sector is ample, interest rates on loans are low and the exchange rate appears relatively steady. Bank credit has also improved its growth rates and banks have gradually diversified the structure of their credit portfolio. Key banking sector's soundness indicators - liquidity, capitalisation, profitability - remain at high levels, whereas the non-performing loans ratio is set on a clearly downward trend. Coupled with the on-going consolidation of the banking sector, they pave the way for this sector to adopt a more active approach to lending.
These development trends have reflected: (i) improvement in the external environment; (ii) harmonisation of fiscal consolidation with monetary stimulus and policies for the stabilisation and development of the financial sector; and (iii) structural reforms undertaken in this period.
In 2018, the Bank of Albania continued and even strengthened the monetary stimulus, hence lowering the financing costs further and mitigating foreign exchange market volatility. Moreover, in 2018, the Bank of Albania:
- Worked for implementing the plan of measures for reducing non-performing loans;
- Took concrete actions for the implementation of the national plan for increasing the use of the Albanian lek in economic and financial activities in Albania;
- Worked on improving the regulatory framework and banking supervision practices, as well as on strengthening safety nets of the financial system; and
- Exercise its competences further for developing the financial market and the payment systems.
The outlook for Albania's development remains positive. In the absence of shocks, the Albanian economy will continue to grow in the medium-term horizon, supporting growth in employment and wages, return of inflation to target and further improvement of the overall macroeconomic equilibriums.
The materialisation of these projections and the achievement of our objectives require maintaining the current trend of our economic policies: monetary stimulus, fiscal consolidation, and safeguarding financial stability. In particular, the normalisation of the monetary policy will be carried out cautiously and the intensity of the monetary stimulus will be adjusted to the balance of inflationary pressures.
On the other hand, as we have previously stated, the balance of risks appears notably tilted to the downside. In particular, the significant worsening in the external environment and the heightened political tensions at home may pose negative consequences to the economy. The Bank of Albania is monitoring attentively developments in the external environment, with a view to identifying an appropriate and duly response. We also judge that any effort made for a calm political situation would contribute to maintaining the positive trend of economic developments.
In any case, the response of the Bank of Albania, through its main instruments - the monetary policy and banking regulation and supervision - will be coherent with the challenges that lie ahead of us and consistent with the achievement of our objectives.
In a long-term perspective, the Bank of Albania continues to evidence that structural reforms in Albania need to continue. These reforms should aim at boosting productivity and competitiveness, accelerating the pace of growth and the speed of convergence with the European Union, and promoting the stability of the Albanian economy and financial system.
Structural reforms should continue to be far sighted, ambitious and comprehensive. They should be increasingly anchored in the European integration process and aim a broad-based political and social consensus.
Within its domain of expertise, the Bank of Albania has been and will continue to be a committed and serious partner for advancing the development agenda of Albania.