TIRANA, May 31 – The sharp cut in loan interest rates has had little impact on boosting credit to the economy which continues remaining at negative growth rates, hinting sluggish demand and uncertainty by both businesses and households.
Latest data published by the country’s central bank shows lending remained at negative growth rates for the ninth month in a row, despite interest rates on lek-denominated loans dropping by almost 2 percent during this period. Credit to the economy contracted by an annual 1.8 percent in April 2016 when interest rates on loans denominated in the national currency dropped to a historic low of 6 percent, almost half compared to the pre-crisis credit boom.
The loan rates, although considerably lower compared to the pre-crisis period, are still considered high and unaffordable by the business community because of being six times higher compared to the deposit rates which have dropped below 1 percent.
Lek-denominated deposit rates dropped to a new all-time low of 0.89 percent in April 2016 just before the central bank cut the key interest rate to a new historic low of 1.25 percent.
The country’s central bank says further reducing non-performing loans, currently at 17 percent down from a record high of 25 percent in mid-2014, is a pre-condition for a recovery in credit at a time when new bankruptcies in the industry sector are posing a new threat.
