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Albanian Economy in the BoA Annual Report. Explanation of Structure and concrete data. l ecture of Prof. Dr. Shkelqim Cani Bank of Albania Governor Shkoder, 09 Prill 2004 www.bankofalbania.org email:public@bankofalbania.org. Table of Content: . World Economy

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  1. Albanian Economy in the BoA Annual Report. Explanation of Structure and concrete data.lecture of Prof. Dr. Shkelqim CaniBank of Albania Governor Shkoder, 09 Prill 2004www.bankofalbania.org email:public@bankofalbania.org

  2. Table of Content: • World Economy • Economic-financial developments and % of interest • Region economies • Albanian economy • Overall product by producing sectors • Labour market • Fiscal sector developments • Inflation developments and monetary policy • Balance of payments • Foreign exchange reserve and its management • Banking system performance Why this content: Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  3. Bank of Albania Annual Report, 2003 World Economy • Euro is appreciated against American dollar by 21%. The effects are felt even in the Albanian economy. • ECB’s and Fed’s monetary policy are smoothing, base interest rates of euro are reduced by (2%) and dollar by (1%). - European economy has a lower growth rate than that of America, respectively 0.4 and 3.1 %. • Region economy has satisfactory growth rates (about 4 %). We highlight: - Insecurities created from the War in Iraq - Non-real price rise in capital markets of USA. - Obvious effects provided by SARS epidemic. Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  4. Development by sectors -Services sector’s weight in GDP is increased (46.1 %) -Agriculture contribution to economic growth has declined ( 24.7 %) -Industrial output is increased, occupying 10.2 % of GDP. -Construction is one of the most dynamic sectors of economy (over 20% growth). -Modest growth (3 %) of investments in transport. -Domestic savings are increased by 1 %. (4 % of GDP). Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  5. Some indicators of Albanian economy over 8 last years

  6. Performance of savings and investments Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  7. Fiscal Sector DevelopmentsFiscal indicators 1994 – 2003 (in billions of Leks) Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  8. Budget Deficit Budget financing in 2003 (in millions of Leks) Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  9. Inflation and monetary policy Annual inflation as of December 2003 resulted to 3.3 %, i.e within the Bank of Albania 2-4 per cent targeted band. This inflation level has provided a positive contribution to Albanian economy development. Main impact was given by the group of “Foodstuff and non-alcoholic beverages”, energy (May) and telephony (December)Developments of monetary indicators (net international reserve, net domestic assets, net domestic credit to government) according to forecasts.Appreciating trend of Lek against Euro and dollar, particularly during the second half of the year. Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  10. Annual inflation (in %) Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  11. Factors having impacted on inflation performance • Budget expenditure and budget deficit • Monetary policy and developments in monetary indicators • Exchange rate performance • War in Iraq • Agriculture sector • Raw material cost rise • Imported inflation - effective campaign on preventing and smoothing the speculative price rise. Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  12. Exchange rate performance Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  13. Balance of payments Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  14. Monetary Developments and Markets • Performance of new credit in years, in billions of Leks Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  15. Banking system developments • Banking system enumerates 15 banks at year-end 2003. Following February 2004, there are 16 banks. • Banking system profit is Lek 4.5 billion. • Depositing activity is increased by Lek 42.5 billion or 14.7 %. Public confidence in banks is increased. • Lending activity – credit was increased by Lek 12 billion. • The new credit was Lek 92.6 billion (about USD 900 million, or 48 % more than in 2002) • Credit, 20 % in Lek and 80 % in foreign currency Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  16. Real and nominal 12-month Lek time deposit interests Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  17. Interest rates on credit extended in foreign currency Interest rate Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  18. Banking Supervision • Licensing and regulatory framework - Credins Bank is granted the definitive license - Popular Bank is granted the preliminary license - American Bank of Albania (permit to establish a branch in Greece) - Increasing the number of non-bank entities with two other entities. - The number of Savings and Credit Associations was increased by 20 new associations. - Establishment of a Representation Office of Pugliese Bank in Tirana • Savings Bank’s privatization by the well-known Raiffeisen Bank is expected to raise banking competition, provide new services to customers, restart lending activity and increase Banking system efficiency. Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  19. Banking system performance Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  20. Banking system performance Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  21. Developments in Payment System • During 2003 the system of the new accounting project, ATM for upgrading the Bank of Albania operations was implemented. • Albanian Interbank Payment System. • Transactions in real time, 2 seconds at maximum. • 94 payments effected during the first day, at the value of 48 million dollars. • 12 banks in the system. The entry of two new banks is expected. • Benefiting businessmen and public as well. Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  22. Other Bank of Albania activities • Strategy of the Bank of Albania’s integration to the system of European Central Banks. • Cooperation with other institutions to reduce cash in economy • Campaign against speculative price rise at the threshold of end-year celebrations. • Fourth international conference of the Bank of Albania. • Campaign to increase public confidence on the advantages of Savings Bank’s privatization. Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

  23. The End • Thank you for your attention! • You are invited to make questions! Leksion i Guvernatorit te Bankes se Shqiperise z.Shkelqim Cani, Prill 2004

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