Credit to the economy in the kink

Since the first quarter, loan growth has almost stopped and the lasttwo months have been negative. The Bank of Albania says that creditslowdown relates primarily to the reduction in the consumer’s demandin the market.

According to INSTAT, in the first quarter of the year, retail salesindex, which is the closest indicator of consumption, fell by 8.3percent compared to a year ago. Family’s reluctance to spend money hasput the economy in a negative vortex, because downfall of demand inthe market is stopping the business to make new investments. This isalso confirmed by the performance of foreign currency loans to theprivate sector, which is mainly used to finance investments.

Since the end of last year, foreign currency loans are almost stopped.Figures show that almost all new loans for the business have been inLEKË were ALL business, used mainly to fund everyday expenses.

But the decline in loan demand from individuals and businesses is notthe only reason why the loan entered into kink. Even the banks havebecome more careful, because they perceive greater risks to theeconomy. The bank of Albania says that this situation is temporary andexpects the loan to have higher growth rates over the coming months.But so far, its measures to boost the economy, have had minimaleffects.

Monetary stimulus, through the historical minimum base rate cut failedto revive consumer demand for goods and services or to reduce theinterest rates on loans in the domestic market, while the otherbusinesses complain that there is no liquidity in the market.

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