BANK OF ALBANIA

PRESS RELEASE
Governor Sejko attends the regional summit on '’Monetary policy in an inflationary environment”, Bečići, Montenegro

Publication date: 02.10.2022

 

On 1 October 2022, the Governor of the Bank of Albania, Mr Gent Sejko, attended the annual regional summit held in Bečići, Montenegro. This summit brought together governors of central banks of Montenegro, North Macedonia, Bosnia-Herzegovina, Slovenia, Kosovo and Croatia.

This year's summit on “Monetary policy in an inflationary environment” discussed the latest developments in the economies of the region and the current challenges they are tackling due to the upsurge in prices in global markets. This shock has not spared any economy, both at the European and global levels.

Governor Sejko was invited to address the summit in the Governor's Panel, focusing on monetary policy stance pursued by the central banks of the region, as well as the orientation of economic policies on the preservation of price stability, as a precondition for the financial stability of the countries.

At the beginning of his speech, in this panel, Governor Sejko pointed out that the Albanian economy has suffered successive shocks in recent years. However, it has succeeded to continue to expand at a good pace. Despite the considerable challenges that lie ahead, the expectations are positive and the economic growth is foreseen to range around 4% in 2022, while it is expected to slow down to 2-3% in the coming years.

In terms of monetary policy stance in regional countries, the Governor emphasised that it is somewhat affected by the stance pursued from both the European Central Bank and the Federal Reserve. 

Regional countries, likewise across the world, are facing the threat of high inflation. He stated that central banks, can effectively anchor inflation expectations by communicating clearly their decisions, by leveraging on their credible monetary policy frameworks, and by protecting their independence.

Governor Sejko highlighted that the priority of the central bank is to preserve monetary and financial stability. This translates into bringing inflation down in a sustainable and timely manner, while limiting as far as possible the cost to economic activity and to the banking sector balance sheets.  Achieving this requires a delicate balancing act between conflicting objectives in a period of high uncertainty.

Next, Governor Sejko responded to questions from participants, who were interest on the exchange rate issue in Albania and the performance of the national currency. In this regard, the Governor, first, pointed out that the Bank of Albania operates under a free-floating exchange rate regime, which is fully determined by the demand and supply in the market.

He stated that the appreciation of the national currency, so far has been directly driven by the seasonal factors, particularly the impact originating from tourism, also the increase of exports in Albania.

Then, Mr Sejko explained, that in addition to tourism, trade balance is also a crucial factor in the appreciation of the domestic currency. In this context, exports have been trending upwards, both in goods and services. These inflows in foreign currency, mainly in euro, have driven to the appreciated exchange rate, in favour of the lek.

Concluding, related to the exchange rate, Governor Sejko underscored that the appreciation of the domestic currency, in view of inflationary pressures, provides a positive impact on inflation rate. A strengthened exchange rate shows that the Albanian economy is positively reacting against inflation and serves as an absorbing factor to various shocks.