Quarterly Monetary Policy Report, 2020/II

The available information shows that the health emergency caused by the spread of Covid-19 pandemic and the measures taken by the public authorities to control it, in Albania and globally, posed challenges to: the economic and financial stability of the country; the soundness of enterprises and households’ finances; and the sustainability of the economic growth of Albania, both in the medium and long term. This twofold shock, demand and supply, will be reflected in the downturn of the economic activity during 2020, by triggering a fall of employment, increase of unemployment, decrease of household income and financial difficulties to firms. The Supervisory Council of the Bank of Albania has taken a complete package of measures to address the situation, which include: the easing of monetary policy stance, through the cut of the policy rate; the unlimited supply with liquidity to the banking system; the temporary postponing of the credit payment, with one quarter; the facilitation of the operational cost of electronic payment system; and the normal supply of economy with cash. In the positive scenario, the current monetary policy stance will remain accommodative throughout the forecast horizon. On the other hand, the Supervisory Council deems that the uncertainty surrounding the forecasts for this time is considerably high. The materialisation of these risks might dictate a further easing of the monetary policy stance. This easing may take the form of non-conventional instruments.