Albania's central bank held its key benchmark rate at a record low of 1.25 percent on Wednesday and promised to continue providing economic stimulus until October to support investments and consumption. The bank, which has cut the rate from 6.25 percent at the end of 2008, expects average annual inflation of 2.3 percent in 2017, slightly below the bank's target of 3 percent but up from 1.3 percent last year.

"The Supervisory Council thinks the intensity of monetary stimulus will not diminish until the fourth quarter of 2017," Central Bank governor Gent Sejko told reporters.
The board also kept unchanged the one-day deposit rate at 0.25 percent and the one-day lending rate at 2.25 percent, Sejko said following the Supervisory Board meeting.

Data shows the economy has continued to expand, raising the employment rate by 8.5 percent annually in the third quarter of 2016 and nudging inflation gradually towards its 3 percent goal. "Our forecasts remain positive. The Bank of Albania expects a strengthening of economic growth over the next two years and the return of inflation to its goal during 2018," Sejko said.

The bank stated that the Albanian economy grew by 3.3 percent in 2016, up from 2.6 percent in 2015.

The government and the International Monetary Fund expect the economy to have grown slightly faster last year, at 3.4 percent, and forecasts expansion of 3.7 percent this year. Excluding a write-off of bad loans, lending to the private sector in November was 3.4 percent higher than a year ago, Sejko said, adding there had been a 10.4 percent rise in Albanian leke loans and a 1.4 percent decline in euro-denominated lending.

Bad loans in 16 commercial banks, most of them foreign-owned, fell to 18.2 percent of their total lending in December, Sejko said, down from 21.4 percent in August. "This reduction reflects the combined effects of improved economic activity, restructuring of loans and the write-off of irretrievable loans from the books," Sejko said.

The European Bank for Reconstruction and Development, EBRD, released Friday in Tirana its Transition Report 2016-17 which, according to Governor Sejko, affirmed Albania’s improvement in growth, continued low inflation and further progress in the clearance of public sector arrears during the past year.

“The conclusions of the EBRD Report on economic and monetary and financial performance are quite similar to the analysis and conclusions of the Bank of Albania at the end of 2016. More specifically, the Albanian economy has accelerated the growth rates driven primarily by the Central Bank’s accommodative monetary policy and its effects on the economy. Such factors, together with the further recovery of domestic demand will play an important role in higher growth of economic activity during 2017,” Governor Sejko said in his remarks./