Reduced interest rate from the Bank of Albania helped the economy by offering cheaper loans for individuals. But there is also a negative consequence: devaluation of citizens’ deposits.
“Let’s not forget that interest rates are 1%, don’t cover even inflation. The real value of deposits gets lower. In these conditions, individuals look for other ways’, says Arjan Kadare, expert of the economy.
According to the Bank of Albania, deposits in local currency have reduced by 4%, compared to one year ago, because keeping money in banks gives no more profit. Some individuals are placing their savings in Treasury bonds and investment funds, which offer more profit. But these instruments have a higher risk.
“Investment funds are not are not insured the way deposits are, but there is nothing without risk”, Kadare said.
Managing savings when interest rates are low, that is a difficult task. What do experts advise people who have savings aside?
“In these conditions, you should make investments, even risky ones, to balance the diversified portfolio. There is no sense to stay away from making long-term investments, such as government funds. Investment funds should be considered part of the investment portfolio”, the expert says.
The Bank of Albania has warned that the interest rate will not change at least for one year, which may force citizens to keep looking for other investment alternatives.
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