PRESS RELEASE
Questions and answers at the governor's press conference, 04.11.2015

Question - During this period, two of the indicators, economic growth and lending have been falling, being on the down side of the expectations. When you say you have reduced your expectations on recovery or return to the full trajectory of economic growth and inflation, do you mean you have revised down your projections about economic growth? Which are the signals or indicators that have led you to this conclusion?

Governor: As I said in an interview two days ago, we have made our corrections about economic growth in cooperation with the International Monetary Fund. This is not breaking news. At the year start, economic growth was projected for 3%. We have revised down our forecast for economic growth from 2.5% to 2.7%.

According to our analyses, and those of international financial institutions, there are a number of contributing factors, which mainly relate to the external environment. To mention a few: lower growth in the euro area and in the Albanian exports towards both euro area countries and neighbouring countries. This is talking in terms of forecasts, because the year has not ended yet, and we do not know whether the year will end at 2.7% or 2.5%.

In this regard, we have revised our projections also about inflation forecasts, whose return to target has been postponed for one or two quarters.

I would like to reiterate that what is important is to maintain the positive trend in economic growth around 2.5%, higher than the 2% in 2014. Year 2016 will continue in the positive trend of economic growth and the economic setting will continue to recover. 

Question: I would like to ask you about the Eurobond. How are negotiations for the Eurobond going, and, will the domestic banking market be able to replace the amount of money the Government is asking in international markets? And, if yes, Mr Governor does the lowering of the key interest rate help the Government to borrow at lower interest rates, either from the central bank or commercial banks?

Governor: The Ministry of Finance is monitoring the market and is now in the process for the finalisation of the transaction for the issue of the Eurobond. I do not have any information about the current state of developments, as we speak, but to our knowledge, they are monitoring the markets. I believe that within this year, this issue, that is, the Eurobond will be concluded. The right moment when this will happen will depend on developments in international financial markets, related to liquidity and interest rate.

The existing EUR 300 million Eurobond is matured. The Government, with its funds, has replaced this amount. Of course, the domestic market is capable of generating this amount, but we would prefer the external market for the Eurobond. Borrowing in the external market would make free funds available for lending to the Albanian economy. This is also in line with our stimulating monetary policy. If the Eurobond were issued in international markets, our accommodative monetary policy, with the key interest rate lowered for the Albanian lek, would have fuller effect. If the Eurobond were issued in the domestic market, the interest rates would then rise. Our accommodative monetary policy is in parallel and in accordance with the policy or actions for the Eurobond to be issued in international markets.

We are monitoring the situation very carefully and are cooperating with the Ministry of Finance for a successful issuance of the Eurobond.

Question: A few days ago, the new premises of the Bank of Albania were inaugurated. But former Governor Fullani was not present. Why wasn't he invited, he was the one that initiated this project and left it almost completed? Second, in the address of the Prime Minister we find an acknowledgement for Mr Fullani, but in your address we find nothing about him. Why?

Governor: Actually, I was expecting questions related to the monetary policy statement; however, all questions are welcomed. Frankly and honestly, the list of invitees was prepared by the protocol unit of the Bank of Albania; I was abroad and returned only in the last moments.

Governor Fullani has been an old colleague. If the protocol were elaborated better, of course Governor Fullani would have been invited,  not only Governor Fullani, but also all former Governors. Other former Governors were also forgotten. Not inviting the former Governors is a protocol error. However, I noticed some former Governors were present. I would like to make it clear, however, that former Governor Cani was invited in the capacity of the Minister of Finance.

In spite of the above, to be fully transparent, besides a protocol error, I would like to underline that the judicial process for Mr Fullani is not final. In view of the law and of the process, we wished to invite all, not only Governor Fullani, but only once the process is final and he is pronounced not guilty, by all the court instances. Nonetheless, again, I would like to point out that it is a protocol error.

About my address, honestly, this is your interpretation. I would rather not interpret it, but the Prime Minister delivers his speech and I deliver my speech. A fact was mentioned, which took place at the time of the project's approval, but I do not remember whether there were any acknowledgment words or not. On that day, I made it clear, I would rather not speak long at the ceremony; during the day we had the Annual Conference of the Bank of Albania. My address was brief, introductory, because the main focus was on the inauguration of the building and of the Museum of the Bank of Albania, and not on such elements.

Question: On non-performing loans, what does your project envisage about lowering the non-performing loans and how is this going to be realised?

Governor: The project of the Bank of Albania is in line with the inter-institutional plan of measures addressing the non-performing loans. We have spoken earlier about this plan, agreed between a number of actors, signed by the Prime Minister and I. The plan envisages a series of reforms, legal amendments, and various regulatory aspects, which would contribute to addressing non-performing loans. 

As I have previously pointed out, the laws and regulations pertaining to collateral execution and bankruptcy will be subject to revision. This will push forward the process of non-performing loan recovery. We have amended and reviewed the regulations related to the restructuring of non-performing loans, as well as the regulations pertaining to the fiscal treatment of the loan write offs from the balance sheet.

The ratio of non-performing loans has fallen to around 20%. This is mainly due to the write offs and restructuring of a part of loans. To our knowledge, progress has been made in terms of restructuring some corporate loans. We are monitoring the process and hope that the effect will be a further reduction of non-performing loans.

I would like to point out that the reduction of the credit stock by 1% has had a statistical effect in the level of non-performing loans. This indicator is a ratio of the non-performing loans to total loans. If the loan portfolio were not reduced, the non-performing loan ratio would be lower. 

What is important is that the approved plan of measures has been addressed and we are working with the Association of Banks and other stakeholders in the process to successfully finalise this plan. This is the only way to contribute to the recovery of credit to the economy, whose growth would contribute to all the other parameters, such as the non-performing loans, and lending, subsequently, economic growth.