Cash base outside banks increases by 37%

TIRANA, June 8ؔhe Bank of Albania recorded a 37% annual increase in the monetary base outside bank deposits in the first quarter of 2009. It indicates a supersonic growth, considering that the average increase in the monetary base during the last 6 years has been around 9%.
The increase of the M3 indicator, which includes all the monetary supply in the economy had a more modest growth due to tightened credit standards by banks.
The monetary base, which includes all cash in circulation, grew by 18% in 2008 and by 29% in the first quarter of 2009. The monetary base should not grow more than the nominal growth rate of the economy, in order to not boost inflation. The Bank of Albania has been very successful in keeping inflation rates within targeted levels in the last few years and monetary supply has never been a factor to inflation. However, balances have strongly shifted since last October when revenues decreased as a result of the economic crisis. Despite it, the Albanian government has kept spending at high levels in the last 6 months by borrowing at large from 2d tier banks and increasing the monetary supply in the market.
A similar situation is common in other western countries leading economists to fear the return of double digit inflation very soon all over the region.