Albanian Daily News
The central bank of Albania has decided to keep its key rate unchanged at 0.5%, as it considers that the current stance of monetary policy is adequate to support economic growth and for the stable return of inflation to l ‘goal, Central Bank Governor Gent Sejko said on Wednesday.
The central bank also decided to keep the interest rate on the overnight deposit facility at 0.1% and the rate on the overnight lending facility at 0.9%, Sejko said in a statement. communicated.
The economy is expected to grow rapidly this year at 5%, a trend that will continue over the next two years, SejKo added.
The governor also said that “job growth, increased exports and monetary stimulus have supported economic growth.” The Bank of Albania estimates that all three factors will improve in the medium term.
In line with the bank’s exceptions, Sejko said economic activity in Albania recovered in the first two quarters of 2021. According to INSTAT data, the Albanian economy grew by 5.5% in the past. first quarter of the year, while analysis of indirect data suggests even faster growth rates in the second quarter.
Inflation continued its upward trend in April and May. The average inflation rate stood at 1.9% in April and May, notably above the average for the first quarter. Inflation has increased mainly due to rising food and oil prices.
The factors conditioning the stable return of inflation towards the target are improving, but it should converge towards the medium-term objective. Inflation is expected to return to its target in 2022.
The recovery in economic activity has spread to a large extent. In terms of aggregate demand, it reflected the expansion of consumption and private investment, the increase in budgetary expenditure and the expansion of goods and services. In sectoral terms, it reflected the simultaneous expansion of the production and service sectors.
The improvement in economic activity is still not fully reflected in the labor market. According to INSTAT data, employment fell 2.6% annually in the first quarter of 2021, while the unemployment rate stood at 11.9%. These indicators suggest that the Albanian economy is still far from the full normalization of its activity and simulation policies should continue to support this process.
Fiscal policy continued to maintain a simulated character during the first half of the year. Along with the fiscal stimulus, accommodative monetary policy has created favorable financing conditions.
Improving demand for loans and favorable conditions on the supply side have resulted in relatively rapid loan growth. The private sector credit portfolio registered an annual increase of 7.8% in May, compared to the average growth rate of 6.8% in 2020.
Judging by the factual trends of economic and monetary development and their determining factors, the Supervisory Board believes that the Albanian economy will register rapid and stable economic growth rates in the medium term. Improving the external environment, reducing uncertainties, simulating the fiscal and monetary mix and strengthening private sector balance sheets will support economic growth. These factors should stimulate the increase in: consumption; exports; and investments; as well as gradually increasing incomes in all sectors of the economy. Expanding demand will support increased employment, in turn, a further rise in wages and a gradual convergence of inflation towards a target by 2022.
In all cases, projections are based on the assumption of avoiding severe restrictions on economic activity, due to further shocks due to the pandemic. Nevertheless, the course of the coronavirus pandemic (COVID-19) and its impact on the economy remains a source of uncertainty in economic forecasts.