Albanian economy to see progressive growtha: Bank of Albania

The Supervisory Council of the Bank of Albania has decided to keep its key interest rate unchanged at 1.75 percent thanks to the progressive growth of economy, the Albanian Daily News quoted the Quarterly Monetary Policy Report released Wednesday as saying.

Gent Sejko, governor of the Bank of Albania, said the new data for the third and fourth quarters of 2015 showed that Albania's economic activity is moving along a positive trajectory.

"Our analyses and forecasts suggest that the Albanian economy will continue to see positive growth rates in the next three years. Economic activity is expected to return to equilibrium in the first quarter of 2017 and inflation is expected to return to target in the second quarter of 2018," the governor said.

He added that "these forecasts have not changed our previous assessments. The direction and intensity of expected developments reflects actual dynamics of the Albanian economy, expected improvement of the external environment and maintaining the accommodative monetary policy stance over the forecast horizon."

Sejko said that during the second half of 2015, the economy performed on the upside of expectations, thus the expected economic growth for the whole year was slightly revised up.

Based on the current trends, the Bank of Albania expects economic growth to somewhat accelerate in 2016, during which inflation is expected to average at around 2 percent.

Besides, the Bank of Albania believes that private investments will continue to grow, fuelled by foreign direct investments, improved financial situation of firms, payment of arrears, and an easing of financing condition provided by the banking sector.

Household consumption has seen growth since its determining factors such as employment, wages and consumer confidence showed improvement.

However, Albanian exports are suffering from the sluggish performance in international markets. In addition, public spending fell during 2015, reflecting the strong fiscal consolidation by the public sector.

Sejko said that the strong accommodative monetary policy stance has brought interest rates in financial markets to the lowest levels ever.

On the other hand, the issue of the euro bond has reduced public borrowing in domestic financial markets, which subsequently brought interest rates further down, thus contributing to the increasing stimulus of the monetary policy in the economy.

In accordance with the medium-term budget plan, the Bank of Albania thinks that the implementation of the plan for reducing non-performing loans will last in the next two years to ease credit standards and increase bank credit supply.

Albania's economic growth will further improve in the medium-term horizon, initially stimulated by the domestic demand and later by the steady growth of exports, which will in return help the inflation to hit the 3 percent target.

The Bank of Albania analysis suggests that the actual monetary conditions are adequate for achieving the inflation target within a medium-term horizon, based on which the Supervisory Council decided to keep the key interest rate unchanged at 1.75 percent. Endi