Interest rates registered a slight decrease for lek-denominated loans positively reflecting the central bank’s cut to the key interest rate in early 2013 to a historic low of 3.75 percent
TIRANA, June 4 – Lending dropped to a historic low in the first four months of this year when it grew by only 0.9 percent driven by a sharp drop in demand for new loans by crisis-hit households and businesses and tight lending standards banks are applying as bad loans stand at a record 24 percent. Bank of Albania data show lending has remained almost unchanged in the first four months of this year growing by a mere 5 billion lek (Euro 35 million) year-on-year, and registering the lowest growth rates since the collapse of the notorious pyramid schemes in 1997. At the end of April 2013, the loan stock was at around 555 billion lek.
Meanwhile, deposits although decelerating continue preserving a moderate growth trend unveiling consumers’ saving trend and insecurities about their future expecting harsher times ahead. In the first four months of 2013 deposits grew by 5.85 percent year-on-year with its stock climbing to 943 billion lek.
Interest rates registered a slight decrease for lek-denominated loans positively reflecting the central bank’s cut to the key interest rate in early 2013 to a historic low of 3.75 percent. Average interest rates for lek-denominated loans in April 2013 dropped to 10.83 percent, down from 11.4 percent in march 2013 and 11.2 percent in April 2012, according to BoA data.
Meanwhile, average interest rates on Euro-denominated loans rose by 0.2 percent to 7.05 percent compared to last March but were down by 0.5 percent by 0.23 percent compared to April 2012.
Interest rates on 12 month lek-denominated deposits dropped to 5.04 percent in April 2013 down from 5.57 percent a year ago. 12-month Euro deposit interest rates also dropped to 2.41 percent down from 3.25 percent a year ago.
Meanwhile, T-bill yields continue registering new record lows. In the latest Bank of Albania auction, 12-month T-bill yields dropped to 5.73 percent, down from 5.9 percent in the previous auction and 6.35 percent at the beginning of 2013 when the key interest rate was at 4 percent, slightly reducing the cost of Albania’s public debt currently standing at a record 62 percent of the GDP. Twelve-month treasury bills accounted for around 41 percent or 206 billion lek of Albania’s total domestic debt at the end of the first quarter of 2013, according to Finance Ministry data. Yields on 12-month T-bills have been on a downward trend since March 2012, when they were at a record 7.5 percent.
After maintaining one of the region’s highest credit growth rates during the crisis years, at 1.6 percent in 2012, Albania registered one of the lowest loan growth rates among 14 Central and Eastern Europe (CEE) countries, according to a report by Raiffeisen Research, the research team for the entire Raiffeisen banking group in Austria and Central & Eastern Europe (CEE).
Latest available data shows that the ratio for loans and deposits denominated in Albanian lek represented 39 percent of total loans and 50 percent of total deposits respectively. Lek-denominated loans account for 38 percent of the total loan stock
Low inflation pressures have allowed the Bank of Albania to cut the key interest rate by 1.5 percentage points to a historic low of 3.75 percent since Sept. 2011 in an effort to stimulate the economy but the moves have been poorly reflected in lower loan interest rates and an increase in consumption or investments.
