Gent Sejko: Fifth review of the arrangement with the IMF concluded
Speech by Mr Gent Sejko, Governor of the Bank of Albania, at the joint press conference
with the IMF mission, Albanian MoF (Ministry of Finance) and MEDTTE (the Albanian
Ministry of Economic Development, Tourism, Trade, and Entrepreneurship), Tirana, 30 June
2015.
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Dear media representatives,
In line with the already established practice, in the past two weeks, we have constantly met
and exchanged views and opinions with International Monetary Fund representatives. As
always, these meetings serve to make a comprehensive analysis of economic and financial
developments, with a view to identifying the necessary measures for a steady development.
Following, I will present a summary of Bank of Albania's opinion.
The Albanian economy is on a positive development trajectory, irrespective of the
shocks we have been facing in the first half of the year. Economic and financial
balances in Albania are sound. The Banking system is liquid and well capitalised; Albania's
public debt is in control; and, the financial situation of Albanian businesses and households is
improving. Long-term development resources for the country remain stable.
This situation is an outcome of economic policies oriented towards stability, which we
have undertaken. In view of the latest developments in Greece, I would like to emphasize
that the external environment appears challenging, but Albania's economy and financial
system are capable to withstand even extreme shocks. The short-term costs that we have
paid due to structural reforms and fiscal consolidation show their benefits exactly in such
moments.
Under the current circumstances, it is necessary for economic and financial policies
to continue to be guided by the philosophy of prudence. We are able and ready to take
additional measures, if necessary. I would like to assure the private sector that the
development perspectives for the Albanian economy remain positive. Albanian businesses
and households should continue, uninfluenced, with their consumption, investment and
development plans.
Let me be more concrete with regard to the above.
Economic and financial developments have been overall in line with our year-start
projections, but incoming information has resulted on the down side of our
expectations. Therefore, the Bank of Albania has revised down the expected economic
growth for 2015. Yet, in our judgment, shocks are expected to have only a transitory effect on
economic activity indicators and not affect the medium and long-term trends of development.
Economic growth is expected to improve in the second half of the current year and in the two
years ahead, which would enable the return of inflation to equilibrium.
Notwithstanding the above said, the Albanian economy continues to operate below its
potential and inflation remains below Bank of Albania's target. These developments
require maintaining simulating macroeconomic policies for at least some quarters
ahead.
The Bank of Albania has urged and supported the fiscal consolidation trend, pursued
by public finances. Fiscal data, overall, are in line with this target, albeit work should still be
done with regard to the rigorous implementation of public borrowing and spending plan.
The monetary policy implemented by the Bank of Albania is at very simulating
parameters. Interest rates and financing costs are at historical low levels. The Bank of
Albania has ensured that the market is fully supplied with liquidity and has provided
longterm guidance on the monetary policy direction.
In accordance with the monetary policy direction, the Bank of Albania has continued
to implement easing supervisory and regulatory measures. Also, we will announce a
major project very soon, aimed at addressing definitely the issues related with the treatment
and reduction of non-performing loans. All these measures have contributed to and are
expected to better support the Albanian economy with funds.
As I said above, the economic and financial equilibriums of Albania are solid. The
current account deficit improved in the first quarter and the Albanian foreign exchange
position is quite positive. Banking system's liquidity and capitalization indicators have been
improving. The growth of non-performing loans decelerated and the Albanian banking
system is profitable.
Taking into account the international setting, I would like to guarantee the public that
the banking system has no direct exposure to the Greek crisis. Our analyses, both at
individual bank and system level, confirm that that it would maintain the soundness and
normal operations even in extreme adverse scenarios. Lastly, the implementation of the IMF
arrangement not only guarantees the stability of the public debt, but also provides us with the
possibility for additional funds to withstand any unexpected and unwanted development. The
arrangement is an insurance policy, which should assure all the economic actors for the
country's financial soundness.
Dear media representatives,
Concluding, I would like to re-emphasize Bank of Albania's commitment to
safeguarding the country's economic and monetary stability. In our judgment, the
adopted policy framework provides a sound and coordinated development platform.
Pursuant to our legal requirements and the development programme, the Bank of Albania
will continue to work on:
• Maintaining price stability and sustaining the country's development. Under
the current scenarios, the monetary policy stance will remain accommodative for
several quarters ahead. We are, however, willing to take any additional measures
necessary to maintain price stability and the purchasing power of Albanian
households.
• Safeguarding the country's financial stability, in cooperation with all the
stakeholders. We are in on-going contact with our international partners and other
public agencies. Our analyses show that the banking system is stable. However,
even under shocks, we have detailed measure plans available to avoid financial
constraints.
• Developing the financial system further through the implementation of measures
agreed upon under the FSAP arrangement and provided for in cooperation with the
continued IMF assistance.
• Continuous improvement of the Bank of Albania, with a view to enhancing its
professionalism, reputation and independence. In this context, the Bank of Albania
will continue to work on improving the control and management systems, to reduce
operational risks and improve communication and transparency.
In addition, the Bank of Albania emphasizes the need to continue structural reforms,
which will allow faster, more sustainable and more inclusive growth for different social levels
of the society.
Thank you!