Governor Sejko presents BoA annual report 2020 to Parliamentary Committee on Economy and Finance
Today, April 20, 2021, the Governor of the Bank of Albania, Mr. Gent Sejko, through an online communication, presented the annual report of the Bank of Albania for 2020 to the parliamentary committee economy and finance.
Reporting to Parliament is a legal obligation through which the process of accountability and transparency of the institution on its work and results during the year takes place, and informs legislators about the main objectives that the institution aims to achieve in order to guarantee the monetary and financial stability of Albania in the coming period.
Initially, Governor Sejko explained the progress of the Albanian economy in 2020, pointing out that the previous year had been difficult for the Albanian economy due to the negative effect caused by the COVID-19 pandemic.
The governor stressed that the COVID-19 pandemic has been the most serious economic challenge we have faced in the past two decades. Focusing on Albania’s economic performance in 2020, Governor Sejko said economic activity contracted by 3.3%. The economic fall reflected the simultaneous contraction of almost all components of aggregate demand and sectors of the economy. The crisis particularly hit private consumption and market flows, marking a drop in exports of goods and services. On the other hand, consumption and public investment increased gradually, partially offsetting the decline in private demand.
Under these conditions, it was necessary for the public authorities to intervene with extraordinary stimulus measures, not only to mitigate the immediate negative effects of crises, but also to curb their long-term impact on the economy.
The governor said that in coordination with the fiscal stimulus, the Bank of Albania has implemented a comprehensive set of monetary, macroprudential and operational measures, which aimed to maintain liquidity in financial markets, reduce the cost of borrowing , continue to lend and maintain the uninterrupted flow of financial services. As a result, the impact of the crises on the economy has been weaker than expected, reflecting the positive effects of policy measures, as well as the flexibility and resilience of our economic and financial system.
More specifically, in response to the situation created, the Bank of Albania has taken measures such as: reducing the key interest to a minimum of 0.5% historically; accelerate liquidity injections; temporary regulatory facilitation of payment deferrals and loan restructuring; freezing of dividend payments in the banking sector; the loss of fees on interbank transaction fees in the payment systems operated by the BoA, as well as engaging with the public in frequent and transparent communication on the measures taken, their effects and their expectations in the future.
Governor Sejko added that the measures taken were effective, as they supported the economy in several directions. Overall, the Bank of Albania estimates that our stimulating monetary policy has produced a positive effect of 3.7 percentage points on the volume of economic activity in recent years, making a notable contribution to the employment and welfare of Albanian citizens. He pointed out that the Bank of Albania predicts that the Albanian economy will turn towards recovery in 2021, following the gradual reduction of the negative effect of the pandemic. Rising economic activity will help strengthen inflationary pressures and bring inflation back to target by 2022.
In addition, with regard to the banking sector, the governor underlined that it was well capitalized, solid and endowed with good indicators of liquidity and financial solidity. He pointed out that this sector has helped to mitigate the effects caused by the pandemic shock, by exceeding part of the financial burden of the shock, as well as simultaneously keeping all indicators in solid parameters. In 2020, low interest rates and adequate liquidity were accompanied by an average growth of 6.7% of the credit portfolio, thus supporting continued investment and the economy’s growing demand for working capital. . Banking sector activity grew by around 7% and the non-performing loan ratio fell to 8.1% at the end of December, close to all-time lows of the past decade.
In his speech, the Governor listed some of the main contributions of the Bank of Albania regarding the strengthening of banking supervision and support for financial stability, such as the implementation of the recommendations of the Committee of Experts of the Council of the ‘Europe on the evaluation of measures against currency. Money laundering and financial terrorism (MONEYVAL)); regulatory and methodological approximation and the strengthening of supervisory capacities, through the adoption of new regulatory acts and the revision of the regulations in force, bringing them more in line with the EU acquis, the principles of the Committee Basel and best practices in banking supervision; monitor the financial system through field inspections; strengthen resolution capacities; develop and implement macroprudential policy to function of financial stability, etc.
Throughout 2020, the functioning of the economy and the banking sector have been supported by an efficient and secure payment system. In 2020, the regulatory framework for the operation of the AECH and AIPS payment systems was reviewed. The systems have been assessed by international experts against the principles of the Bank for International Settlements (BIS) and the European Central Bank (ECB) and comply with these principles.
In addition, in order to achieve the strategic objectives, the Bank of Albania has started to work on the transposition of the EU directives on payment accounts, which should improve the transparency of payment services and financial inclusion. Population. The year 2020 marked an 18.5% increase in the use of electronic payment instruments. This trend has also been affected by the measures of the Bank of Albania regarding the reduction of fees on wire transfers in lek.
The governor said that, being part of the institutions included in the national plan for European integration, and having the specific role of national coordinator for chapters 4 and 17, the Bank of Albania has fulfilled the reporting obligation and has integrated the recommendations of the European Commission in carrying out its daily tasks.
In addition, the Governor added that the Bank of Albania has made progress in other areas of its activity such as: compilation and dissemination of financial statistics, management of the international reserve, conduct of scientific research and communication. government, management of the national currency, etc.
In conclusion, Governor Sejko said that the Albanian economy has been particularly resistant to the shocks of the previous year and has positive premises for development in the near and distant future. However, downside risks remain high and the economic and financial environment is difficult. The Governor assured that by preserving monetary and financial stability, the Bank of Albania is committed to making its contribution in this regard.
At the end of the session, the Governor responded to questions posed by Committee members.
Bank of Albania published this content on April 20, 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unchanged, on April 20, 2021 11:26:00 AM UTC.