Questions and answers at the press conference, 28 March 2019

Publication date: 28.03.2019


Question: Considering the current political developments – e.g. opposition MPs giving up their parliamentary seats in a mass resignation move – how is this affecting Albania's economy? Do you see this factor integrated into your future reports on the country's economy?

Governor: We have emphasized it in our earlier communications as well, when we have had tense political situations. Naturally any political tension or any other kind of tension has its toll on the economy and cannot be sidestepped if it is prolonged and escalated.

Currently, with the available data, which was presented today at the meeting of the Supervisory Council, the impacts of a deteriorating political situation on the economy are not yet reflected. The data refer to a previous period and do not reflect this impact yet.

The Bank of Albania will continue to monitor the developments and will reflect the outcome in its analyses, if macroeconomic indicators deteriorate due to the political situation.

For the time being, the impacts of the political situation have not yet reflected negatively on the data that we have. The data, as you heard from the statement, overall indicates an upwards positive situation, although certainly, there are also particular complications in some segments since the economy is complex.


Question: What are the factors that have affected the decline in lending and the slight increase of the non-performing loan indicators?

Governor: Regarding lending and non-performing loans, I would like to clarify that lending as an indicator, both in absolute and percentage terms, has declined. But, in fact, we have to consider several factors, and strip lending from their effect. These factors are:

  • the effect of exchange rate appreciation (the accounting exchange rate effect in reflecting credit surplus)
  • the writing-off of lost loans from banks’ balance sheets
  • the impact of a large loan from the EBRD to the Albanian Power Corporation. Loans volume has not changed, but the amount taken by the banking system has decreased, so lending to the economy has not decreased, but lending from the banking system has decreased.

All these three relevant factors have affected the lending figure for 2018. Excluding the impact of these factors, lending has increased by 5%.

Regarding non-performing loan indicators, they were affected by the separation and establishment of the National Commercial Bank, Kosovo branch, as an independent body. This branch has a considerable value, a share of around 3% of our banking system and 11% of the National Commercial Bank itself. The breakaway of this branch has had an impact in terms of both percentage and absolute value of non-performing loans. Non-performing loans reached 11.1% at end-2018 and actually this indicator has a slight increase at 11.5%, due to the separation of the National Commercial Bank’s branch in Kosovo.

Returning to the lending question, in fact, lending has grown year to year. To understand the figures, we refer to new lending. We often get confused by report figures and do not understand whether there is an increase or a decrease of lending. Lending can be seen as a trend, referring to the figure of new lending to the economy.

The new lending figure has risen year to year, also including the renewal of overdrafts. In 2018, this lending was over ALL 2 billion. Just new lending, excluding overdrafts, may be over ALL 1 billion. Total figures including overdrafts have increased. Hence, these really show the growth of lending by the banking sector in Albania.

Our accommodative monetary policy has had a positive impact on lending growth. This is the purpose of the accommodative monetary policy as well, to promote investments in the country.  If we look at it, the overwhelming part of lending growth comes from the increase of lending in lek, due to the decrease of the policy rate and our accommodative monetary policy. Naturally, interest rates of loans in euro have decreased as well, due to the accommodative monetary policy pursued by the European Central Bank. We also have to understand the impacts of the accommodative monetary policy in the framework of high level of euroization, since we still have a high level of it: their share in loans and deposits is almost 50-50.  Therefore, our monetary policy has this limitation, as it applies only to the interest rates in lek, both on loans and deposits. Hence, in short, we have had a moderate growth, but with an upwards trend, in Albania.