Governor Ardian Fullani said the decision by the Supervisory Council of the Bank of Albania would give a new stimulus to the economy promoting consumption and investments which continue to remain at low levels
Tirana Times
TIRANA, Sept. 29 – Albania’s central bank decided on Thursday to lower the key interest rate by 0.25 percentage points to 5 percent, one of the lowest historical levels after inflation rate returned within its target during the past couple of months. The move had been warned by the central bank itself since last August when inflation pressures started dropping after remaining at 4.05 percent, exceeding the 3ѱ percent target by 0.05, percent during the first half of this year.
Economic and financial experts had also called on the central bank to lower the repo rate in order to give a boost to lending which after the 2009 global financial crisis has been at slightly more than 10 percent compared to the pre-crisis levels of 30 to 50 percent. Total lending to both businesses and individuals grew by 10.5 percent during the first half of this year, confirming the Bank of Albania survey results about the tight lending standards banks are applying as bad loans are registering record high levels at nearly 17 percent.
Speaking at a press conference, Governor Ardian Fullani said the decision by the Supervisory Council of the Bank of Albania would give a new stimulus to the economy promoting consumption and investments which continue remaining at low levels.
Last March, BoA raised the repo rate by 0.25 percentage points to 5.25 percent after keeping it unchanged at 5 percent, one of the lowest historical levels, for eight months. Governor Ardian Fullani said the move was aimed at keeping inflation rate in check following a sharp rise in consumer prices last February. The annual inflation rate dropped to a record low of 3.1 percent in August 2011, the lowest rate registered during this year, remaining within the central bank’s 3ѱ percent target band for the third month in a row.
The central bank estimates that the GDP growth has preserved the early 2011 rates even in the second quarter of this year. Latest data published by the country’s Institute of Statistics show the Albanian economy grew by 3.4 percent in the first quarter of 2011 year-on-year with transport, industry, construction and trade as the key sectors contributing to the growth.
The Albanian government expects the country’s economy to grow by 5 percent this year, twice higher compared to what international financial institutions such as the IMF and the World Bank predict for the Balkan country.
Keeping the high public debt levels, currently at the threshold of 60 percent of the GDP under control remains the key challenge for the Albanian government.
