Dear journalists and media representatives,
I feel honoured to meet you today to jointly mark the end of a successful year for
the Central Bank of the Republic of Kosovo and the country's financial system,
which with its activity has continued to be a very important contributor to the
support of development and stability of the country's economy.
Effective communication with the media on a continuous basis has, without a
doubt, been part of this success. CBK has continuously paid special attention to
public transparency, by being open to media regarding all public interest issues. In
order to further advance our cooperation, during this year, we have also organized
a workshop with journalists where we had the opportunity to talk closely about
important topics related to the work of CBK and the financial system of Kosovo. In
addition, in order to facilitate access to information for journalists, we have
appointed a CBK spokesman who greatly facilitated communication between the
CBK and the media. These all indicate that we are continuing to advance our
transparency towards the public and we remain committed to continue this in the
future.
***
Now, please allow me present to you a summary of the developments that
characterized the country's economy and the financial system during 2018, taking
into account the latest available data.
***
Preliminary estimates suggest that the country's economy during 2018 recorded a
real growth rate of about 4%, mainly supported by the increase in domestic
demand, while the deepening of trade deficit had a negative impact on the growth
rate. The factors with the most significant impact on the financing of economic
growth included the acceleration of credit growth for the private sector, the
increase of public expenditures and the increase of remittances, which by
September amounted to euro 587,9 million, which is 6.1 % higher compared to the
same period last year.
Kosovo's economy, as estimated by CBK, is expected to have the similar economic
growth rate next year, when the real growth rate is expected to be around 4.2%.
As regards developments at the general price level, the average inflation rate by the
end of 2018 is expected to be around 1%.
***
Banking activity during this year was characterized by credit growth, improved
conditions for private sector access to loans, and further strengthening of the
sustainability situation. Banking sector loans amounted to EUR 2.7 billion in
October 2018, recording an annual growth of 11.6%. The main source of financing
of banking sector activity remains deposits, the value of which during this period
amounted to EUR 3.2 billion, which represents an annual growth of 6.9%.
Interest rates on loans continued to decline which decreased to 6.6% from 6.8% in
the same period last year, indicating the continued ease of access to bank
financing. Financial health indicators continued to show a high level of
sustainability of this sector in all respects. In particular, it is worth mentioning the
very good quality of the loan portfolio with a non-performing loans ratio of only
2.7% in October 2018, which, compared to last year when it was 3.6%, marked a
further decrease.
***
Other sectors of the financial system were also characterized by favourable
developments. The value of assets of the pension sector in September 2018
amounted to EUR 1.76 billion, marking an annual growth of 11.2%. Return on
pension fund investments continued to be positive, indicating an increase in the
value of pension savings of citizens.
***
The insurance sector continued to increase its insurance activity as well as
compensate the insured against damages. The total written premium value of
insurance companies in September 2018 was EUR 69.1 million, which represents
an annual growth of 4.8%. On the other hand, the value of the damages paid
amounted to EUR 31.5 million, marking an annual growth of 8.2%. Increased
damages paid, in addition to increasing the number of insurance policies, also
reflect the more responsible behaviour of insurance companies against insured
persons.
The insurance sector has continued to have positive financial performance for the
second consecutive year, which represents a very important development for the
sustainability of this sector.
***
Another important sector of the financial system is the microfinance institutions
sector, which is continuing to accelerate the lending rate, becoming a sector that is
increasingly contributing to the growth of competition in the credit market. The
total value of this sector's loans in October 2018 amounted to EUR 177.7 million,
marking an annual growth of 29.1%. However, a falling interest rate from the
current average level of 23.1% would make this sector even more competitive and
with greater role in supporting the domestic economy.
***
The Central Bank of the Republic of Kosovo with all its capacities has continued
to supporti the sustainable development of the financial system, providing all the
necessary infrastructure to support the development of financial institutions and at
the same time ensuring that their activity provides financial stability.
Harmonization of the regulatory framework with the recent international
developments in this area, more specifically in the European Union, has continued
to be an important priority of the CBK during this year, which caused the drafting
of various regulations which advance different aspects of the banking regulation,
such as: the Regulation of IFRS 9 Financial Instruments, and the Regulation on
Non-performing Loans and Restructurings. The application of Regulation IFRS 9
Financial Instruments will result in lower reserves for credit losses at the banking
sector level and will reduce the cost of preparing and auditing the banks' financial
statements since banks will only report under the international financial reporting
framework - IFRS. The Regulation on Non-Performing Loans and Restructurings
will enable the application of the same criteria for the identification of Non-
performing Loans and Restructuring and it fully complies with the criteria applied
in the EU.
In recent years, the CBK has increased its engagement towards the protection of
the rights of financial services consumers, thus directly serving to the protection of
the public interest. Such engagement, either through financial education programs
or through corrective measures to financial institutions, will continue to increase
during the upcoming periods.
During 2018, the CBK, in addition to the advancement of internal capacities, has
been very active in the field of international cooperation. As regards this, I would
like to emphasize the signing of the memorandum of understanding with the
European Central Bank, which paves the way for increased cooperation with this
institution. Also, ensuring an LEI international code for the Republic of Kosovo
was of a special importance. Through this code, the Central Bank of the Republic
of Kosovo is treated equally with other central banks in the execution of financial
transactions.
A more detailed disclosure of the economic and financial developments and CBK
activities during 2018 can be found in the CBK Annual Report, which will be
published in the first half of the next year.
***
Before we move on to your questions, I would like to inform you that the CBK has
continued even this year with the announcement of the already traditional
competition for the "Young Economist" award, and I would like to thank and
congratulate all the candidates for their papers submitted for this competition. This
activity aims to stimulate research activity in the field of economy among young
people.
Based on the evaluation of the professional commission for the evaluation of these
papers, I am pleased to announce today the three winning research papers of this
award, hoping that this will motivate the authors of these research papers and other
young people to continue and advance even further their research work.
The author Jeton Zogjani is awarded the first place with the paper "The
efficiency and impact of banking electronic services: evidence for Kosovo"
The author is awarded the second place with the paper
Venera Ratkoceri "The
impact of Remittances and Foreign Direct Investments on Economic Growth -
Evidence from Albania".
The author is awarded the third place with the paper
Bedri Hasanaj
"Characteristics of Kosovo's economic growth in the last decade"
***
Finally, let me wholeheartedly thank you for the cooperation, professionalism and
correctness you have shown in covering the financial and economic developments
this year and let me wish you and your family great health, happiness and success
for 2018.
You are now welcome to ask questions.