Gent Sejko: Welcome remarks -14th SEE Economic Research
Workshop
Welcome remarks by Mr Gent Sejko, Governor of the Bank of Albania, at the 14th SEE
Economic Research Workshop, virtual, 10 December 2020.
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Dear professors and researchers from academia,
Dear fellow central bank colleagues/researchers,
Dear participants,
It is a great pleasure to open the proceedings of the 14th SEE research Workshop. Due to the
difficulties and restrictions imposed on all of us by the COVID 19 pandemic this year's workshop
is organized virtually. I am glad to see that you are all well, and wish that you and your families
stay safe and healthy during these difficult times. In a way it is sad that we cannot welcome you
all in Tirana during these December days. However, at the same time I am very glad that despite
the forced change in the format and in the presence of the many inconveniences caused upon all
of us by the pandemic and related restrictions, we are having a full house with participants from
the academia in Europe and central banks. We thank you for your interest and take this as a
certification of the quality and reputation of this activity. Our research staff is eager to get to know
your work and discuss with you the research that has been produced by bank of Albania during
2020.
I am glad to see that almost all selected papers, including the ones by academia focus on the
practical issues that are important for the policy formulation and decision making in the central
bank. These works serve as the foundation for our understanding of economic and financial
phenomena and the interaction of our monetary, macro and micro prudential policies with the
economy. It is due to this understanding and knowledge that Bank of Albania crafts its policy
response and chose its policy instruments to respond to significant negative shocks that have hit
our economy.
Recent data suggest that the pandemic has had severe impact on the Albanian economy, which
experienced the strongest contraction of gross domestic product in the last two decades, at -
10.2% during the second quarter of 2020. Macro data on labour markets show that compared to
the end of 2019, the Albanian economy lost about 50 thousand jobs, equal to an annual decline in
employment of 3.6%. As a result of this the unemployment rate increased to 11.9%. Responding
to such developments, inflation in the third quarter decreased to 1.4%, from 1.9% in the previous
quarter. Despite these negative shocks, the measures taken by the Bank of Albania have
provided the necessary monetary stimulus to support the normal functioning of the financial
markets and to ensure the flow of credit in the economy. Interest rates for households and
businesses are low and liquidity pressures are under control, while the exchange rate appears
stable.
The Albanian banking sector remains sound, despite the challenges posed by the pandemic. The
immediate operational measures taken by banks, as well as the macro and micro prudential
measures taken by the Bank of Albania, ensured not only a continuation of the operation of the
critical functions of the banks, but also satisfactory financial intermediation despite the great
shock suffered by the economy. Credit to economy is growing (it grew by 6.3% in the third
quarter 2020), capital is adequate and the banks' balance sheets remain healthy, signalling their
ability to withstand first-round shocks. We are optimistic that the economic activity is expected to
revitalize over the next two years. However, the economic outlook for the future is accompanied
by a high level of uncertainty and downside risks. In the short term, the risks are mostly related to
the uncertainty of the pandemic itself, its severity, duration, and potential return of restricting
measures. In the long run, the risks relate to the long-term damage sustained by the productive
capacities and domestic demand, as well as potential structural change sustained in the
economy as a result of the altered behaviour of economic agents. We are sure that research
based evidence, analysis and forecasts will provide accurate and timely information for policy
orientation and coordination.
Research in the area of monetary policy, financial stability and banking supervision has always
dominated the topics of our workshop. This year COVID-19 has entered the agenda by brute
force. This shock and the negative effects that it brought upon the economy and the central bank
policies have been beyond comprehension. The authorities are feeling the difficulty of performing
their task in the zero lower bound or very close to it. In this respect central banks have lost the
traditional instruments of monetary policy and are reverting to money as the instrument of
monetary policy. The shift has been significant not only in size but also in concept. The leading
central banks in developed economies, the ones which set the trends, are under process of
reviewing their objectives and monetary policy. Using support of research analysis and
conclusions they are eventually rewriting monetary economics by giving central banks new
instrument in the form of permanent use of the central bank balance sheet as a tool of monetary
expansion. However, while implementation of balance-sheet strategies is easy to implement and
deal with for developed countries central banks, same policies might not be easily adaptable and
applicable by developing economies. Narrow and shallow capital markets, problems of financial
inclusion and financial education, stressed private, public and fiscal balance-sheets and history,
remind us of several potential risks that such policies can have for the highly dollarized/euroized
economies of South-East Europe. Yet in the presence of current constrains faced by monetary
policy we have to react and to find new ways to support the economy. It is the role of research to
guide policy reviews and policy models for sustainable economic policies that can promote
growth in the presence of stable prices and financial system.
The news about successful trails of the Covid-19 vaccine candidates, hoping that many more
would result successful in the near future, brings much needed relief. However, as I mentioned
before, uncertainty remains not only regarding production, distribution and the success of
vaccine campaign in the real world, but also regarding the shape and speed of economic and
financial recovery once COVID-19 is defeated. Yet, other risks like climate change, along with
natural disasters, loss of habitats and arable land, demographic and pandemic risks represent
significant long term challenges for global economy. They pose significant risks for our
economies of the South east countries as well. We would need to dedicate more research
resources to the study of these phenomena and their implications for the economy, price and
financial stability in our countries. I am sure they will become important topics of this workshop in
the future.
During the recent years we have seen that research based on surveys and micro data has
provided important information for the financial situation of families and business, their sources of
financing, payment instruments, savings and economic and financial behaviour. I would like to
call your attention that this same information is useful for understanding financial inclusion and
financial literacy in the country. They are two different aspects for wellbeing of families and
business and the stability of our economy. We can make good use of this information as a
starting point for the design and implementation of a national strategy of financial education and
financial inclusion. They are both important objectives for the central bank. These two topics are
set to gain central stage following the emergence and growing trend toward digitalization,
emergence of digital financial instruments and potential introduction of Central Bank Digital
Currencies. I am sure that as financial inclusion and financial education gain more attention in the
mainstream central bank agenda, we will see these topics discussed in our future workshops.
My most important recommendation is that research produced at the central bank, remains
close to central bank interest and has practical value for policy and decision making to achieve
their objective. It must flow naturally into policy making and provide solid foundations for
monetary and financial stability policy.
Finally, I am proud to see how our researchers have progressed in the adoption of the most
sophisticated techniques of research. Simultaneously, I am glad to see that the adoption of
research methods has crossed the boundary of research department and is spreading well into
other departments. Our economists are doing independent research work in support of their day
to day activity. This is the result of our continuous efforts to increase the impact of research in
policymaking. However it is without doubt also a result of activities like this, which introduce or
staff to the relevant work that is done in academia and other central banks. Whether you are from
Academia or central banks, we are grateful for your continued interest and thankful for your
participation. We hope that you and your colleagues will continue to join our workshop in the
future, hopefully, in a COVID free world. Hence, we can go back to our traditional ways of the
past, and give you the opportunity to present your works at Bank of Albania, engage with our
research and introduce yourself to our beautiful Tirana, Albanian culture and the delicious taste of
Albanian cuisine.
Wish you the best and the most productive event!