Gent Sejko: Albanian economic performance in 2021 and
challenges for the coming years
Welcome remarks Mr Gediminas Šimkus, Chairman of the Board of the Bank of Lithuania, at the
Economics Conference "Creating Pathways Towards the Green Economy", Vilnius, 21 October
2021.
* * *
Honourable AAB Chairman,
Dear senior representatives and colleagues from the banking system in Albania,
Ladies and gentlemen,
It is a great pleasure to return back to this special event of the end of year, traditionally organised
by the Albanian Association of Banks. It is even more significant to share the experiences,
meaningful moments, and even hardships we all have been going through in the course of these
past two years. First, allow me to provide briefly an overall view on the economic performance in
2021.
The Albanian economy has shown a remarkable recovery over 2021, surpassing our initial
expectations. The ongoing positive momentum is strong, broad based and tangible. Our gross
domestic product stands already at its pre-crisis level, employment is recovering, internal and
external balances have strengthened, and the main banking sector's soundness indicators have
been improved.
In this view, I would like to highlight that the sources of economic growth have returned to their
upward and diversifying trend. In terms of the aggregate demand, the rebound in economic
growth has been supported by the exports of goods and service edging up, coupled with the
increased domestic consumption and investments.
From a sectorial perspective, the expansion of economic activity did largely reflect the recovery
of the industry sector and the services sector. From a policy perspective, the ongoing recovery is
driven by an accommodative financial environment, attributable to the strong fiscal and monetary
stimulus. Furthermore, it reflects a higher global demand, strong private sector balance sheets,
and heightened optimism amongst businesses and households.
The Albanian economy enjoys the necessary prerequisites for a stable and sustained growth in
the future, while the opening of accession negotiations with the European Union will bolster both
the economic growth and the domestic and foreign investments.
Again this year, the Albanian banking sector continued the trend of positive performance and
showed a steady resilience to external shocks (two-year effects of pandemic). Banking activity
continued to expand (over 9%), largely supported by domestic deposits (over 80% of assets),
and without affecting the overall capitalization of the banking 18.4%), due to increased capital
buffers and prudential dividend policies followed by the banks, fully cooperating with Bank of
Albania. Profitability has improved and liquidity remains strong.
The loan portfolio shows a well-diversified increase (+10% overall), between Lek and foreign
currency, business, retail and mortgage.
The NPLs ratio continued to decrease (from 8.13% to 6.3%), benefiting both from the increase of
overall loan portfolio and the reduction of non-performing loans (-17%). Alongside the reduction of
NPLs values, the overall coverage ratio has improved (from 65% to 70%).
Nonetheless, there is still ample room for credit growth, considering large liquidity reserves, low
loan to deposit ratios and positive profitability that can fully support capital.
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Dear representatives of the banking sector,
In the context of these two hard years, the prospective on the economic growth in Albania is
positive and optimistic, while it provides to the banking system a robust ground to expand their
activity, through the strong engagement, efforts and commitments of all stakeholders.
Let me now share with you some of the main common challenges that we have to face together
in the following years.
the banking sector will continue to consolidate further in the next year, after the acquisition
First,
of Alpha Bank from OTP NYRT. This development is expected to lead to increased competition,
especially between major players in the market. The loan portfolio remains the largest contributor
to income in the balance sheet, and in order to maintain the competitive position, banks need to
preserve and increase it continuously. While the market offers opportunities for loan growth and
banks are well equipped with liquidity and capital buffers, it is indispensable to establish a
longterm vision and set forth strategic objectives, designed carefully to exploit such potential in the
long run, for building the necessary infrastructure within the bank and strengthening the
relationships with clients.
the Bank of Albania has an important role in the process of aligning the legislative
Second,
framework to the EU requirements, as the responsible authority for the oversight of 90% of
financial market. Part of this process is the additional capital requirements that have been
introduced during last years. Our aim has been to introduce smoothly these requirements,
without impairing the competitiveness of individual banks and curtailing their growth potential. The
process is extended over a long time frame and during this frame we will closely monitor the
progress of building necessary capital and MREL buffers, as well as carefully calibrate the
aggregate capital requirements in an appropriate and flexible manner, in order not to hamper the
organic and healthy growth of the banking activity. Meanwhile, the positive profitability provides a
good support for the capital growth.
Third, while we have been determined in introducing for the first time the cap on EIR and
penalties, we recognize that such new rules, being introduced for the first time in Albania, will
have operational and financial implications for the market. In 2021, the Bank of Albania started a
comprehensive consultation process regarding the upcoming regulatory changes related to the
introduction of the cap on EIR and penalties. These changes became necessary, following the
expansion of consumer loans market, to reduce asymmetries within this market and to fulfil the
role of BoA with regard to customer protection and financial inclusion. We have received different
types of feedback from the market actors (mostly positive from banks), and have reflected to the
largest extend possible all their comments and suggestions. In this light, we will be prepared and
reasonably flexible for the necessary calibration and the smooth transition. In the next year, we
will continue the dialogue with the industry, following the results of the first EIR cap application
and mostly debated rate cap on consumer loan penalties.
the financial infrastructure of the banking sector has been enhanced further during the
Fourth,
last couple of years. The Bank of Albania and the National Payment Systems Committee have
implemented the national strategy for enhancing the small value payment market and increasing
the financial inclusion of the population. The first results are promising and they will be followed
by other steps by the Bank of Albania and the banking sector, aimed at achieving a quantitative
objective, that is, to see the number of bank account holders doubled by 2023. The Bank of
Albania will be soon launching the new payment system for the settlement of domestic euro
payments. This system intends to enhance the efficiency on this market's segment by reducing
the costs bared by banks with actual solutions which are channelled to the end customer and
beyond that, is going to enhance also the formalisation of Albanian economy.
Concluding, I take the opportunity to reaffirm and re-assure you on the devotion and strong
position of the Bank of Albania to always be transparent, open and supportive throughout its
activity.
I wish you a successful and prosperous year for you and your families!
Thank you!