TIRANA, Aug. 4 – Lending to the economy hit a one-year low of 0.75 percent in June 2015 on sluggish demand by both businesses and households and tight lending standards by commercial banks as non-performing loans continued standing at around a quarter.
Data published by the country’s central bank shows credit was down by 1.34 percent or 7.5 billion lek (Euro 52.8 million) compared to December 2014 as interest rates increased.
Average interest rates on lek-denominated loans surprisingly rose to 8.4 percent in June 2015, up from 8.15 percent last May, 7.75 percent in December 2014 and 9.05 percent in June 2014 despite the key interest rate standing at a historic low of 2 percent since late January 2015.
Interest rates on Euro-denominated loans, which account for around 60 percent of total credit, slightly dropped to 6 percent last June and were down to 4.75 percent on U.S. dollar-denominated loans.
Lending to the economy registered a turning point in July 2014 when it overcame a 12-month moderate decline of around 2 percent as the economy struggled with its poorest growth rate in more than a decade and bad loans stood at around a quarter.
After growing by 30 to 50 percent annually in the pre-crisis years, lending grew by an average of 10 percent from 2009 to 2011 but sharply decelerated to 2.36 percent in 2012 and shrank by 1.25 percent in 2013 as bad loans hit a record of 24 percent.
Albania’s central bank has kept the key interest rate at a historic low of 2 percent since late January 2015 after 13 consecutive slashes by 0.25 percentage points since August 2011, when the key rate was at 5.25 percent.
Meanwhile, deposits also slowed down to 1.7 percent as interest rates stand at a record low and tougher competition from the emerging investment funds offering higher interest rates.
Interest rates on lek-denominated deposits dropped to an almost record low of 1.44 percent in June 2015, the same to the annual inflation rate.
Interest rates on Euro-denominated deposits also remained at a historic low of 0.28 percent for the second quarter in a row as the European Central Bank continues keeping its key rate at a historic low of 0.05 percent.
Central bank data show the deposit growth slowed down to 2 to 3 percent in 2013 and 2014, down from 6.3 percent in 2012, and 11.7 percent in 2011, unveiling the downward trend in consumers’ saving trend.
