TIRANA, Jan. 7 – With the economy struggling with poor growth rates of slightly above 2 percent and interest rates at a historic low, investment opportunities for Albanian savers have considerably reduced, turning them to risky investments such as informal lending and online stock trading.
Economy experts appeal the government should work on improving the business climate and reactivating the Tirana Stock Exchange which closed down last year after more than a decade of inefficiency.
Zef Preà§i, an economy expert, says there is a tendency of an increase in high-risk informal lending and illegal activities such as investments in online stock exchanges.
“Failure to achieve the expected improvement in the business climate has reduced investment opportunities and created a situation with lack of clarity how to act,” says Preà§i, who also head the Albanian Centre for Economic Research.
“The business climate should be improved as soon as possible not only bringing it in line with western standards, but also taking into consideration the mentality, the institutions, the tradition of having the investments protected,” he told a local TV.
Investments in real estate and in the newly established investment funds are suggested as new opportunities.
Deposits grew by only 1.5 percent year-on-year in November 2015 when average interest rates for lek-denominated savings dropped to 1.33 percent, down from 1.6 percent in November 2014, and 2.5 percent a year earlier.
While traditional bank deposits struggle to remain at positive growth rates due to a sharp cut in interest rates, the emerging investment funds continue registering moderate growth rates fuelled by more favourable interest rates although at slower pace compared the boom following their establishment in 2012.
A report published by the Financial Supervisory Authority, shows net assets in the two investment funds, controlled by Raiffeisen Bank, the country’s biggest commercial bank, rose by an annual 6 percent to 67.6 billion lek (Euro 479 mln) in the first three quarters of this year.
Meanwhile, lending failed to return to positive growth rates for the fourth month in a row last November when it contracted by 2.2 percent year-on-year.
Tight lending standards because of non-performing loans standing at 20 percent and poor demand for new loans have contributed to the situation.
Interest rates on both lek and euro-denominated loans at historical lows are also proving inefficient to fuel demand on new loans.
Average interest rates on lek-denominated loans dropped to a historic low of 7.4 percent last November, when the central bank cut the key rate by another 0.25 percent to all-time low of 1.75.
The loan rates in the national currency, although considerably lower compared to the pre-crisis period, are still considered high and unaffordable by the business community because of being six times higher compared to the deposit rates which have dropped below the average inflation rate for the past year.
