BoA Report: Financial market stable, non-performing loans at 4.3%

2025-12-17 18:23:00, Ekonomi CNA

The Bank of Albania today shared data from the Interim Monetary Policy Report for the fourth quarter.

According to data from this analysis, it is suggested that the Albanian economy has continued to follow a positive development trajectory during the second half of 2025.

This performance is reflected in the solid growth of economic activity, keeping inflation under control, and the consolidation of the main indicators of the country's economic and financial health.

Excerpt from the report:

In macroeconomic terms, domestic inflationary pressures remain in line with the price stability objective, reflecting a better balance of supply and demand in the product market. On the other hand, external pressures have weakened further, reflecting the decline in commodity prices in international markets and the appreciation – albeit slower – of the Lek. Reflecting these developments, domestic and core inflation have increased during the year, staying around average levels of 3.1-3.5% in October-November, while imported inflation is in negative territory and short-term inflation has fallen to its historical lows.

After growing by 3.6% in the first half of the year, available information suggests that the Albanian economy has continued to grow at a similar pace in the second half of the year. Data from the real, monetary and fiscal sectors signal further growth in consumption, investment and exports of services, reflecting the continuation of the positive trend in recent months. In particular, the growth of around 22% in tourism services in the third quarter shows the continuation of the positive contribution of this sector. This dynamic has contributed to the improvement of the external position, leading the Albanian economy – for the first time in the post-transition period – towards a current account surplus for the first three quarters of the year.

Economic growth has also been reflected in labor market performance. The unemployment rate fell to 8.1% in the third quarter, while private sector wages increased by 9.8%, indicating dynamic and broad-based growth. So far, wage growth has supported household purchasing power growth, without generating additional inflationary pressures. However, strong business demand and labor constraints continue to keep the labor market under pressure, posing an upside risk to inflation.

Overall, the factors supporting economic growth in the medium term appear solid. The stable financial position of the private sector, together with the positive climate of confidence and favorable financing conditions, have encouraged the growth of private consumption and investment. In parallel, the growth of tourism revenues has continued to make a positive contribution to the economy.

At the same time, prudent and coordinated macroeconomic policies have made it possible to maintain price stability and have strengthened macroeconomic sustainability.

In particular, monetary policy has shifted to an accommodative direction during 2025, reducing the key interest rate in July and continuing to maintain a strong presence in the foreign exchange market, with the aim of mitigating upward pressures on the exchange rate. These interventions have contributed to greater exchange rate and financial environment stability.

As a result, the financial market has appeared stable, with low risk premiums and low interest rates. Credit to the private sector has continued to expand at high rates, driven by stable demand and supported by favorable financing conditions. The loan portfolio recorded an annual growth of 14.2% in October, remaining close to the previous year's rates, but significantly above the average of recent years. In particular, three positive developments are noted: first, the steady growth of investment credit, which signals the expansion of the country's productive capacities; second, the rapid growth of credit in Lek and its increase in its share in the total, which improves both the scope for monetary policy and the country's financial stability; and, third, the stable quality of the portfolio, illustrated by the low level of the non-performing loans ratio, of 4.3% . /CNA