Konfindustria opposes repo rate increase

TIRANA, April 11 – Albania’s business community represented by Konfindutria has described the country’s central bank decision to raise the key interest rate for the national currency, lek, as a measure taken in inappropriate time for the country’s economy. In a statement issued last weekend, Konfindustria administrator Gjergj Buxhuku said that the increase in the repo rate for lek few weeks ago was a psychological shock for both businesses and banks despite the relatively low portfolio of loans in the national currency, around 1/4 of the total, compared to 3/4 for loans in euro and dollar.
“Konfindutria considers this initiative as a measure taken in an inappropriate moment for the Albanian economy with an expected growth of 4.5 percent in the first quarter of 2011, positive developments in international markets and big domestic demand for liquidity.”
According to Confederation of Albanian industries, the biggest concern or the Albanian banking system and the Bank of Albania should be the rapid increase in the bad loan portfolio which it says it close to the 15 percent dangerous threshold.
However, Albania’s central bank said the decision to raise the repo rate by 0.25 percentage points to 5.25 percent was necessary to keep soaring inflation in check.
Most experts also supported the decision with some of them describing it as delayed.
Last week, the European Central Bank raised its key interest rate by 25 basis points to 1.25 percent, tightening policy as expected to counter firming price pressures in the 17-country euro zone.