TIRANA, May 18 – With interest rates on traditional bank deposits below 1 percent for the national currency and close to zero but still at positive rates for euro-denominated savings, Albanian savers withdrew more than a hundred million euros in deposits in the first quarter of this year and invested a considerable part of it in the more profitable but riskier investment funds.
Central bank data shows deposits contracted by about 15.7 billion lek (€115 mln) in the first quarter of this year compared to December 2016 when they grew by a mere 0.1 percent year-on-year to hit a record 1 trillion (€7.4 billion), about 70 percent of the country’s GDP.
By contrast, net assets in the emerging investment funds, heavily investing in government securities, registered a considerable increase amid declining but yet twice higher rates compared to traditional bank deposits, according to the Financial Supervisory Authority. Data shows net assets in the three investment funds rose by 5.4 billion lek (€40 mln) to about 71 billion lek (€520 mln) in the first quarter of this year compared to the end of 2016 when investment funds suffered their first annual contraction after rapid growth in their first four years of operation.
Deposits in Albania have only registered modest growth rates in the past four years affected by constantly declining interest rates as the key rate currently stands at a historic low of 1.25 percent in a bid to discourage savings and promote domestic investment and spending through lower loan rates. The slow but positive growth in deposits has also been a result of the transfer of migrant savings to local banks, especially from Greece and Italy where interest rates on euro-denominated deposits are at negative growth rates compared to slightly above zero in Albania.
Albania’s banking system is highly euroized with euro-denominated deposits and loans accounting for half of the total.
The number of investors at the now three investment funds following the launch of new Albanian-run fund in mid-2016 rose to more 31,000 at the end of the first quarter of this year.
The emerging investment fund market is dominated by investments in government bonds and T-bills, accounting for 78 percent of total assets, a 9 percent decline compared to 2015.
