Bank of Albania: Economic dangers

The report shows that the first danger is related with the shrinking of the economic growth, due to the expected world economy slowdown, the lack of space for a stimulating fiscal policy and the decline of consumption and investments. The report says that if the economy slows down, it could negatively affect the business decisions for adding investments, stopping this way the revival of the bank loan demand.

Another danger, according to the bank, is that of the currency exchange rate. Although ALL has been stable against EUR in the last year, the bank notes that the currency exchange rate dangers remain present and could hit the economy in two directions.

One is by deteriorating the government debt and the second is by increasing the bad loans. But the report mostly focuses on the dangers of the banking system. The report values that the Albanian Banks are in good financial shape and have sufficient liquidity, due to the strong deposit increase, but it underlines that the dangers from the crisis have increased.

This is due to the decline of bank profits and lower capital. Bank of Albania is undertaking some quicker measures for avoiding these dangers. First of all, banks are asked to make a clearer identification of problematic loans, by seeking coverage with the respecting funds. The second measure obliges the bank shareholders to increase the capital, which is the most important indicator for a bank’s paying capabilities. These actions, the report says, combined with the measures for a further reduction of operative costs, will avoid the dangers and will gradually create the bank conditions for a return of stable profits.

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