Albania Central Bank Statement

Author: IFLR Correspondent | Published: 24 Sep 2019
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The prospects for the Albanian economy continue to ameliorate. Over the short- to medium-term, our projections indicate the economy will continue its steady path of cyclical recovery. Higher aggregate demand will help increase employment and improve capacity use. This will pave the way for a gradual convergence of CPI inflation to target and for stronger economic and financial equilibria. Over the long term, Albania's growth potential will benefit further from continued structural reforms and the acceleration of the EU accession process.

The Bank of Albania remains committed to ensuring its policies and actions remain properly supportive of this vision.

Recent economic and financial trends indicate our domestic economic activity is experiencing a solid expansion. The growth momentum appears to be broad based, from both a demand and a sectorial point of view. On the demand side, growth is underpinned by recovering household consumption and a positive investment cycle, while being progressively supported by growing exports, especially in the tourism sector. On the production side, the growing aggregate demand has helped all the main sectors of the economy – services, industry and construction – to grow.

The cyclical recovery is anchored in a prudent policy mix. Furthermore, it is buoyed by a broadly supportive external environment, as well as by increased confidence and the recovering balance sheets of the private sector. To illustrate, non-performing loans (NPLs) are on a steadily declining path, external private sector debt is being reduced and liquidity is ample across both financial and non-financial corporations.

Fiscal policy continues to be focused on reducing public debt and improving the public finance management framework, with public debt already on a clear downward trajectory. Lower public debt levels will increase our resilience to shocks, while reduced public sector borrowing in domestic financial markets will strengthen the monetary policy transmission mechanism.

Monetary policy remains extremely accommodative, with interest rates at historically low levels and a nascent credit recovery continuing to gather pace. The Bank of Albania will continue to maintain an accommodative monetary policy in the foreseeable future, but the intensity of the monetary stimulus will be data-dependent, aiming to align domestic monetary conditions with our price stability target. On the other hand, Banka of Albania's financial policies are aimed at strengthening financial stability, while taking due care to provide incentives for a sound financial sector development.

The Bank of Albania will strive to increasingly align its banking sector regulation and supervision practices with those of the European Central Bank, with the strategic goal of providing a clear and consistent arena for domestic and international players. Recent increases in financial market activity, as well as the higher diversification of financial market players, are encouraging signs for the future.

Over the long term, we will continue to insist on the need to maintain focus on structural reforms. Increasing prosperity and accelerating convergence with the EU will require additional effort to increase productivity, accelerate investment and improve education.