Gent Sejko: Statement - press conference with IMF Mission Chief
Statement by Mr Gent Sejko, Governor of the Bank of Albania, at the joint press
conference with the International Monetary Fund (IMF) Mission Chief for Albania
Minister of Finance and Economy, Tirana, 10 October 2022.
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Dear media representatives,
In the last two weeks, the Bank of Albania and the Albanian government have been
engaged in intensive discussions with the IMF Mission, which visited Albania in the
framework of the regular Article IV consultations. Discussion focused on current
challenges for the Albanian economy, as well as structural reforms that would enable a
faster and more sustainable development of the country in the long term.
Allow me - first and foremost - to extend my thanks to the IMF Mission for the open
share of views in addition to the fruitful and transparent discussions. Overall, the Bank
of Albania and the IMF share similar opinions on the developmental challenges that lie
ahead.
The swift upsurge of prices in the global markets following the unprovoked military
aggression of Russia over Ukraine, have triggered serious economic and social
challenges for the economies and citizens of all countries around the world, including
Albania.
Inflation hit 8% in August, increasing at a rapid pace and having a broad base. Based
on our judgement, we have previously stressed out that the high inflation is the main
threat on the macroeconomic stability and both the stable and long-term growth of
Albania. This inflation corrodes the households' purchasing power, increases the
uncertainty for the future in every cell of the economy, heightens the volatility of
financial markets, and damages the long-term perspective of development. Therefore,
the primary focus of economic policies should be the undertaking of coordinated
measures to mitigate the cost borne by inflation, and control and return it to its target, in
the shortest time period and with the lowest cost possible.
Against this backdrop, the Bank of Albania has embarked on the gradual normalisation
of the monetary policy. This normalisation is undertaken in parallel with all the other
central banks, across the region and around the world, which are facing the same high
inflation phenomenon. It engenders a progressive raise of the key interest rate, by
slowly changing the nature of the monetary policy stance from the current position,
which has been stimulating, towards a more neutral position, which provides a more
sustainable support for the long-term growth of Albania.
During the discussions of the past two weeks, we have gladly observed that our
viewpoint is also shared by the IMF Mission and the Ministry of Finance and Economy.
Our future projections suggest that inflation will continue to remain high in the two next
quarters as well. Furthermore, the stabilisation of prices in foreign markets and the
normalisation of the monetary policy stance will induce a progressive reduction of
inflation, until its return to the target in 2024 H1.
In the same vein, our projections suggest that the Albanian economy will continue to
grow in the medium-term horizon. Although the economic activity will suffer from the
negative consequences of inflation, the economic growth of Albania is expected to
remain in the positive territory.
Economic growth will continue to benefit from the overall financial and economic
stability in Albania, the sound balance sheets of enterprises and households, as well as
the continuing support of the banking sector with credit and payment instruments.
In this context, it should be emphasized that the banking sector appears sound, liquid,
and well-capitalised. The continuing reforms undertaken in the past years have borne
their fruits. The consolidation of the banking sector, the improvement of the lending
environment, the multifaceted development of financial markets and payment systems,
as well as the initiatives carried out that encourage the use of national currency, have
brought about notable qualitative improvements in the stability and efficiency of the
banking sector. The growth rate of credit to the private sector recorded a progressive
improvement, peaking to 13.7% in August. Also, it shows a good coverage of the need
of enterprises and households for long-term financing and liquid tools. The stable
growth of credit and the increase in the quality of its portfolio, are crucial indicators
which demonstrate the sector's support to the economic recovery of Albania.
To this end, the Bank of Albania will continue to work diligently for: the prudent
regulation and supervision of the banking activity; the financial market and payment
system development; the promotion of the financial stability of the country, as well as
for bolstering the financial education and inclusion of the public. Although the
challenges facing ahead are not few and far in between, I am convinced that the
banking industry will continue to remain a trusted partner to Albanian enterprises and
households.
In conclusion, I would like to stress out that the Bank of Albania supports and
encourages the structural reforms. This agenda of reforms has now found a stable
anchor in the process of negotiations undertaken in the framework of the European
Union membership.
The continuous investment on reforms, which boost and encourage the macroeconomic
stability of the country, the improvement of the business climate, the increase of
efficiency and competitiveness, the improvement of human and institutional capacities,
as well as the comprehensive development of infrastructure, is the one and only path
toward a faster economic and social progress.