Governor Fullani warned fiscal indicators in the 2011 budget must be based on careful projections by duly addressing potential risk factors
TIRANA, Nov. 25 – Central bank governor Ardian Fullani says the Albanian economy continued its positive growth even during the third quarter of this year mainly because of continuing good performance of Albanian exports and the increased tourist season revenues. Speaking at a press conference on Wednesday, Fullani said referring to preliminary and indirect data that the Albanian economy continued growing despite increased instability in the global economy during the third quarter affecting Albanian exports, prices of basic food product, and capital inflow because of increased hesitation by foreign investors.
Domestic demand although improving remained poor because of budget cuts government made last July for the remaining of the year. Data show Albania’s trade gap narrowed by only 0.7 percent during the first nine months of this year because of 9.5 percent increase in imports and lower exports compared to the first half of the year.
The third quarter growth was mainly based on private sector demand while the public sector’s contribution declined.
Bank of Albania data show public spending contracted by 3.3 percent year-on-year during the first nine months of this year mainly because of a considerably drop in investments.
Speaking of the 2011 draft budget, governor Fullani warned fiscal indicators must be based on careful projections by duly addressing potential risk factors.
“Under conditions when the public debt levels remain at 60 percent of the GDP, we advise the preservation of fiscal alertness even in the coming years to fulfill deficit and public debt goals and serve mid-and long-term fiscal stability.”
Year-on-year data show the Albanian economy grew by 2 percent in the first quarter of 2010 and 3.3 percent in the second quarter recovering from the shrink registered in the last quarter of 2009. The GDP growth for the third quarter of this year will be published at the end of next December.
The Albanian economy saw a significant decline in its growth rate in 2009, from 7.9 per cent in 2008 to an estimated 3.3 per cent in 2009, but remained one of the few European economies which did not suffer a recession.
Key interest rate unchanged
The Supervisory Council of the Bank of Albania decided to keep the repo rate unchanged at 5 percent, describing the current monetary conditions as favourable to fulfill inflation goals and stimulate the economy.
The last time the central bank changed the key interest rate was at the end of July 2010, when it cut it by 0.25 percentage points taking it to 5 percent in another effort to increase lending in lek, the national currency. The move came few days after the majority approved in Parliament budget cuts of 25 percent aimed at keeping public debt at 59.5 percent during this year and lowering budget deficit to 3.1 percent of the GDP.
The central had bank expected credit to the private sector to accelerate during the second half of this year after the budget review and the cut of the key interest rate by 0.25 percentage points few weeks ago. However, data show lending standards remained tight for both businesses and consumers even in the third quarter of this year.
Although lending rates remain at low levels, the central banks says it has provided the necessary conditions to support credit to the private sector and that the financial situation of commercial banks operating in Albanian allow them to play a more active role in promoting lending.
Lending standards during the third quarter of this year eased somehow for businesses but further tightened for individuals, said the Bank of Albania in a survey published in its latest monetary policy report.
Data show lending standards eased only for small and medium-sized enterprises and home loans to individuals, confirming the commercial banks’ hesitation to lend for the third quarter in a row this year, especially because of a significant increase in the bad loans which climbed to 13.5 percent at the end of September 2010.
