Between 2007 and 2009, the worst of the global economic crisis, bad loans in Albania increased 300 percent.
TIRANA, Feb. 18 – The number of bad loans has continued to increase in Albania, although there are some signs of improvement, the country’s central bank said this week.
Between 2007 and 2009, the worst of the global economic crisis, bad loans in Albania increased 300 percent.
Bank of Albania’s latest data on those who had defaulted on their loans or were behind in their payments showed that bad loans continued to grow although 2009’s last quarter saw a lower pace in that growth.
According to the BoA data, by the end of December under-performing loans reached 10.3 percent of the total or 0.5 percent more than third quarter last year.
Compared to 2008, bad loans increased by about 5 percent, while compared with the end of 2007, they have increased three times.
Banking sector experts say there are a number of causes that have led to strong growth of bad loans.
They include shrinking family incomes, businesses in crisis and depreciation of the local currency, mainly against the euro. These factors have made it harder for people to pay back the banks for loans they took in better times.
For statistical purposes, falling credit for the economy in general is also increasing bad loans.
Partly scared by the increasing numbers of bad loans and due to the liquidity problems they have that are related to the economic crisis, banks continued in 2009 to restrict they lending.
According to official data, credit growth in 2009 fell by three times compared with a year ago. BoA’s data shows that lending rates in the economy have fallen to low levels since 2003. Businesses are also finding it difficult to find financing for new investments.
Experts say the low levels of credit expansion in part reflect the decline of demand for consumption and investment as a result of the weak economy.
But the Bank of Albania says future credit performance will be an important factor on the economy’s recovery.
Bank of Albania has for several months urged Albanian commercial banks to lend more. It repeated in its latest statement that it stands ready to help the banking system with the necessary measures to reactivate the credit markets.
In a statement, the central said, “the banking system can and should make more of an effort to transmit monetary policy by providing more credit to the economy.”
“Without harming fulfilling our mandate to control inflation, we remain willing to help the banking system through taking necessary measures to reactivated the credit market,” BoA Governor Adrian Fullani told the Albanian banking executives at a recent event. “Support your customers and continue lending to reliable borrowers, because it is helpful to your customers, to you and all of the economy. I am convinced that you have real opportunities to do so in competitive conditions, particularly for loans in the national currency.”
When comparing Albania with the rest of the region, the country is actually doing better than many others, which have been severely affected by the financial crisis, leading to a dramatic increase in bad bank loans.
Lowering the number of bad loans can help banks redeploy their assets back into the economy, giving a boost to economic recovery and job creation, according to economic experts.
