PRESS RELEASE
Questions and answers at the press conference on 24 November 2021

Question: Governor, you have stated, even earlier and in discussions with the IMF, that vaccination will be an indicator of economic growth or how recovery will progress from this situation?  Now that vaccination has started and it appears that we will go towards herd immunity, what is the forecast of the Bank of Albania about the vaccination in its economic growth’s projection?

Governor: Last year closed in a recension, economic downturn, whose final figure is expected to be around -4%. Absolutely, based on the monetary policy statement and the analyses we have conducted with the departments at the Bank of Albania, in line with our international partners, as the International Monetary Fund and the World Bank, we forecast the economic activity to grow in the next two years.

The forecast in figures -for the moment, as forecasts do change on on-going basis - for this year, the growth stands at 4.9%, and 4.1% in the next year. Nevertheless, the forecasts change and depend on the pandemic situation.

You mentioned the vaccines.  Absolutely, vaccines are the key element for accelerating the improvement of pandemic situation, and in parallel, the economy will recover.  This is clear not only for Albania and region, also for the world.  The fastest the population is vaccinated and the herd immunity is reached, the faster security will be established and normality will come back.  Absolutely, the economic indicators will improve.

One of the elements that we expect, in parallel with vaccination and the improvement of pandemic situation is the summer season - which is always a test for tourism- it is one of the main pillars of the Albanian economy.  It is a test showing how economic recovery will progress.  Of course there are uncertainties.   I emphasised that the balance of risks is on the downside, exactly due to these reasons, as we do not how long the pandemic will last.  We try to make real forecasts and based on these forecasts we arrive to the above conclusions. That is why we expect a recovery in the next two years, in case the pandemic will gradually come to an end.  That's all we have to say for now.

Question: Last year, and in the current one, the exchange rate has not been changed, how is the de-euroization process proceeding?  Assuming that there will be a re-opening, what are the new things and developments expected to happen?

Governor: Regarding the question about de-euroization, it is an issue that we have already discussed and continue to monitor. The Bank of Albania has in place a policy for promoting the use of the national currency.  This policy on increasing the use of the national currency is being implemented for two main reasons: theoretical and practical ones, but mainly for strengthening the transmission of monetary policy aiming at simulating consumption, investments and lending. Thus, for the purposes of: bolstering the economic growth and increasing Albanian citizens’ welfare; and on the other side, for preserving the financial stability.  Our objective is safeguarding the financial stability, as loans is foreign currency are exposed to a high level, without accounting the clients having income in lek, while the loan is in foreign currency.   If we would have an inflationary situation in long term - depreciation situation of the national currency - of course, this high share accounting for 1/4 of credit portfolio, would trigger serious problems for the performance of banks, and would arise a shock on the financial stability.

For these reasons, for a better pass through of monetary policy and for preserving financial stability, the Bank of Albania, also central banks in general, promote the national currency and aim at increasing its use.  Euroization in Albania - once it used to be dollarisation- stands at high levels and for these reasons we try to lower them.

The measures have been already implemented, euroization has trended downward, but we do not aim to avoid euro.  Absolutely, foreign trade, imports and exports, will operate in Euro, but the sale and purchase of some products should take place in the national currency, lek.  There is no need for euro to circulate where no required.  Import-export activities will be conducted in Euro, while domestic activity should be carried out in the national one.

These are our objectives regarding the de-euroization policy.  We do repeat these aims as there is no harm from repetition.  The achievement of these goals would drive the Bank of Albania to fulfil its objectives. In turn, we will be more secure regarding the banking system; financial stability; and better transmission of the monetary policy.