PRESS RELEASE
Governor Sejko: Statement at the joint press conference with the IMF Mission Chief and the Minister of Finance

Honourable Minister Malaj,

Honourable IMF Mission Chief,

Dear media representatives,

Let me first thank the IMF Mission for the fruitful discussions we have had over the last days in the framework of periodic Article IV consultations.

The intensive discussions that took place focused on: the analysis of the current and expected economic, monetary and financial developments of the country; the identification of development challenges; as well as on the construction of an economic policies and structural reforms framework, which bolster a faster and more sustainable development of the country.

In conclusion of these discussion, I am pleased to note that our views converge on each of the above topics. Following, I would like to briefly share with you the opinion of the Bank of Albania.

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The Albanian economy is on a positive development track. Economic growth rates and the improvement across almost all economic and financial stability parameters of Albania illustrate this performance. In more concrete terms:

• The volume of economic activity, employment and wages have edged up at a rapid pace over the first half of 2024.
• Inflation has been coming down, standing close to 2% during the last two quarters. This indicator - which is the primary objective of our work - after the relatively high rates recorded in the two previous years, stands at low levels, under control and close - though below - our price stability objective.
• The balance of trade is on an improving track, fuelled by the growth in income from tourism and reflected in a strengthened trend of the exchange rate.
• In parallel, the country's public debt and external debt are declining, staying close to the lowest levels in more than a decade.
• Last, the banking sector appears sound, with good liquidity, capitalization and profitability indicators. In addition, our stress test analyses suggest this sector is able to withstand unexpected shocks in the future.

This overview of positive developments reflects both the resilience and flexibility of our private sector, as well as the right direction of the economic policies we have implemented, in addition to the successful results achieved from the structural reforms we have undertaken.

Focusing on this aspect, I would like to highlight that the Bank of Albania has provided a positive and crucial contribution in preserving the economic stability of Albania and bolstering its sustainable and long-term development.

• Our monetary policy, anchored on a flexible regime of targeted inflation and a free-floating exchange rate regime, has enabled preserving price stability and withstanding external shocks at a minimum cost on the country's economic activity and financial stability. The gradual and prudential normalisation of the monetary policy stance over the course of 2022-2023, coupled with the flexible and consistent reaction to the performance of inflation in the current year, have enabled Albania to have - at the same time - one of the lowest inflation rates, one of the highest economic growth rates, as well as a stimulating financial environment and a lending activity picking up swiftly.
• Also, the constant improvement of our regulatory framework, the prudential supervision of the banking sector, as well as our macroprudential measures, have: contributed positively to the financial stability of the country; enhanced public confidence in the banking sector; and empowered a rapid and sustainable growth of lending.
• Last, the Bank of Albania has been working on the development of financial markets and payment instruments, aimed at both expanding the range and reducing their costs. In particular, the steady investment we have undertaken to improve the technological platforms of the payment system, their legal and regulatory basis, as well as financial education of the public, have resulted in an elevated use of electronic payments, a shorter time and reduced costs in carrying out payments, in turn serving to the enhanced efficiency and formalization of the economy.

In addition, the accelerated membership of Albania in SEPA is assessed to provide a very positive impact in this regard. Albania, upon the successful application in June 2024, is expected to be part of this important market very soon. SEPA’s membership will substantially support economic exchanges with the European Union countries and with those which are included in SEPA geographic scope.

Projections on the future remain positive. The Bank of Albania expects economic activity to grow further, both in the short run and in the medium and long term. Economic growth is expected to range at 3.5 - 4% during the current year and remain in line with the potential in the next years. In parallel, inflation is expected to remain low and contained, converging to our 3% target by 2025.

Based on these projections, we judge that economic policies should continue to be oriented towards the further strengthening of economic stability. In this context, allow me to emphasise that persisting fiscal consolidation process over the next few years enables the implementation of a flexible monetary policy and oriented towards price stability.

However, Albania in the course of its development in the future will face many challenges. On the one hand, the sustainable long-term development of Albania requires a higher focus on growing productivity, through strengthening innovation, efficiency and competition of Albanian businesses, as well as on the further expansion and diversification of the sectoral growth base. On the other hand, Albania is exposed to long-term challenges and potential shocks in the future, which arise from geopolitical tensions, demographic problems, climate change and financial innovation. Therefore, it is indispensable, maintaining the focus on guaranteeing macroeconomic stability as well as continuing the improvement of the monetary, financial and fiscal soundness of the economy.

The Bank of Albania deems that the holistic regulatory, legal and institutional reforms, undertaken in the framework of the integration process in the European Union, provide a complete and consistent platform for addressing the challenges.

The Bank of Albania will continue to work with responsibility, professionalism and transparency, with a view to achieve its mission and legal duties. Our monetary policy will continue to remain focused exclusively on price stability. In achieving this mission, we will continue to be based on the current monetary policy framework, which has proven to be efficient and successful, trying to adapt it continuously to the challenges the time triggers. Also, we will continue to work for: further strengthening the financial stability in Albania; preserving public confidence in the banking sector; establishing a suitable credit environment; as well as for further developing financial markets and payment instruments.

Thank You!