The interest norm effects

The goal of this intervention was to encourage the economy and consumption for not allowing the economic growth to fall even more. But what were the effects?

The World Bank data shows that the interest rate has not been transmitted to the market. The loan interests remain in the same levels and the loan growth rate keeps being low, same as before.

Beside these, there is another signal which shows that the Bank’s measures for encouraging the economy are not transmitted to the market. A recent loan observation shows that private banks have continued holding difficult criteria for business and individual loans.

Experts: Crisis and government make loans more difficult

Experts say that the basic interest rate doesn’t function completely in difficult economic times.

“The basic interest rate is a good instrument for normal times, but it doesn’t work in abnormal times. This is proved by the European and US economies, to which although we are with negative norms, the influence of the demand is minimal”, declared expert Selami Xhepa.

Gjergj Filipi from the Agenda Institution shares the same opinion, but he says that in Albania’s case, the positive effects of the interest rate reduction are conditioned by the government’s policies.

“This is related with the fact that the banks have insecurities for the interest rates, which is justified with the lies of the factors that have caused the loss of trust in the entire country”, Filipi declared.

However, both experts share the same opinion when they say that the interest rate reduction should be accompanied with the restructuring of the loans, so that the economy can benefit better.

“We are not talking about deleting companies from portfolios when they are on the brink of bankruptcy. In this case, the bank’s interest is to reduce the rates”, Xhepa declared.

“Second-level banks should be cautious in this time of crisis, for not applying high interest rates”, Filipi declared.

However, the monetary policy only cannot be the magic pill. The economic growth is mostly depended from other policies.

“The policies for supporting the agriculture exports are an encouragement of the economic growth”, Filipi declared.

But the crisis also has its lessons.

“The lessons are that all policies have their limits and the economic growth cannot be stimulated forcedly. The economic development will follow its course”, Xhepa specified.

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