The Bank of Albania survey revealed that around 27 percent of 1,200 surveyed households nationwide have a debt to pay mostly in the national currency, lek
TIRANA, April 24 – A Bank of Albania survey has reconfirmed the difficult financial situation both consumers and businesses are facing as the Albanian economy strives to recover since more than three years now. Unable to afford high interest rates from loans, Albanian households have returned to informal lending, borrowing from friends and relatives, which accounts for a majority of 54 percent.
The Bank of Albania survey conducted as part of the financial stability report for the second half of 2011 revealed that around 27 percent of 1,200 surveyed households nationwide have a debt to pay mostly in the national currency, lek.
Home purchase/repair, consumption and business development are the main reasons of households’ borrowing needs. Debt payment costs around 81 percent of households 30 percent of their monthly income while the remaining part spends up to 50 percent of their revenues.
However, what’s more concerning is that 2/3 of surveyed households says their capacity to pay off debts has remained unchanged while 26 percent say their finances deteriorated in the second half of 2011.
Employment in the private sector accounts for 27 percent of households’ revenues, pensions 30 percent and self-employment 24 percent. Falling income and rising prices have forced 60 percent of households to lower their monthly spending, seek a second job and negotiate on debt terms in 15 percent of cases.
Businesses are also facing tough times to pay off loans and 2/3 of the surveyed say they do not plan to get new loan for the first six months of 2012.
Loans finance the majority of over 60 percent of the business activity compared to only 32 percent from sales. Some 38 percent of the surveyed businesses borrow to finance current expenditure compared to 35.7 percent for long-term investments.
Loans account for 50 percent of the capital for 3/4 of surveyed businesses.
The findings are in line with the latest results from another Bank of Albania survey showing both businesses and consumers became more pessimistic in the first quarter of 2012 and expect harsher times to come as consumption and private investments struggle to recover. Banks’ lending standards have also considerably tightened while demand for new loans remains poor. Lending has grown moderately at slightly more than 10 percent during the past three years compared to the pre-crisis levels of 30 to 50 percent.
According to a recent EBRD report, Albanian households have cut down on food and luxury product consumption. In addition, they have also reduced medical and dental check-ups and increased informal borrowing from relatives and friends. The crisis has affected people’s income and has among others brought delays in the payment of basic services while the high percentage of loans in foreign currency, at around 70 percent of the total, has further aggravated crisis impacts due to the depreciation of Albanian lek against Euro.
Around 60 per cent of respondents say that their households have been significantly affected, compared to a transition region average of about 50 per cent, says the report published this week which surveyed almost 39,000 households in 34 countries.
