The Governor of the Bank of Albania, Mr. Gent Sejko, and the Minister of Finance and Economy, Mrs. Anila Denaj, held online meetings with Mrs. Anna Bjerde, Vice President of the World Bank for the Europe and Central Asia Region and with Mr. Alfred Kammer, Director of the Europe Department at the IMF, in the framework of the Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WB).
Discussions of these meetings focused on the impact of the pandemic on the performance of the Albanian economy, developments in the financial and banking system, as well as expectations regarding economic indicators in the future.
During the meeting, Governor Sejko and Minister Denaj said that the Albanian economy has been under the strong effect of the pandemic during the first half of the year, especially in the second quarter of 2020. As a result, most economic indicators are expected to be affected by negative consequences. of the pandemic this year. Meanwhile, in the medium term, the duration and impact of the pandemic will be essential in determining the path of recovery of the Albanian economy, which is expected to begin recovery in 2021.
Regarding the banking system, the Governor said that the pandemic found the system with good financial indicators, as well as with a good level of capitalization and liquidity. This sector, the Governor stressed, has continued without any interruption the normal activity and has remained ready to make the necessary contribution to cope with and overcome the situation created by the Covid-19 pandemic.
He added that domestic financial markets are calm and stable interest rates have prevailed. The exchange rate appears to be stabilizing, beyond the fact that at the beginning of the restrictions imposed due to the pandemic, the local currency depreciated.
Further, Governor Sejko presented the measures taken by the Bank of Albania in response to the shock created by the pandemic, where we can mention the increase of monetary stimulus, through lowering the key interest rate and increasing liquidity injections, as well as changes in the framework. regulators, which aimed to facilitate the temporary postponement of the payment of installments and the restructuring of bank loans to customers in difficulty.
Regarding the easing monetary policy pursued by the Bank of Albania, the Governor assessed that it remains adequate by providing the necessary stimulus to stimulate economic growth and return inflation to target within 2022.
Minister Denaj assessed that fiscal policy has also played an important role in addressing the situation, financially supporting citizens and providing liquidity support to affected businesses. Also, sovereign guarantee funds for private companies have contributed as a continuous flow of funds, helping in the liquidity situation of businesses and supporting them in difficult moments.
Minister Denaj stressed that despite the contraction of GDP in the first 6 months of the year, from -10.2%, forecasts for the year remain in a decline of only -5%, accompanied by an unemployment rate of 12.5%. The Ministry of Finance and Economy is committed to return to fiscal consolidation, with a primary positive balance from 2022, safely from 2023, a forecast made in the changes of the organic budget law. Minister Denaj also brought to attention the innovations of next year's draft budget, focusing on the increase of capital expenditures, salaries of priority sectors and the reconstruction project. The Minister stressed that debt projections are still projected to expand, albeit at lower levels than during the pandemic year, returning to fiscal consolidation within the next 5 years.
Representatives of the WB and the IMF praised the contribution given by the Albanian authorities in managing the pandemic in the economy, especially through the harmonization of fiscal and monetary policy, the support provided to citizens and businesses affected by the shocks, as well as the preservation of macroeconomic stability of Albania.
During the meeting, the Albanian delegation expressed gratitude to the representatives of the World Bank and the IMF for the ongoing assistance to key institutions in the country. The delegation also praised the Rapid Financial Instrument, as a very valuable opportunity, offered to Albania in a timely manner, to address the various needs that may arise in this pandemic situation.