Presenting the central bank’s recommendations on the 2027 draft budget to parliament’s Committee on Economy, Employment and Finance, Deputy Governor Natasha Ahmetaj said a more even distribution of budget expenditure throughout the year, particularly public investment, would improve the efficiency of public spending.

“The Bank of Albania stresses the need for more consistent planning and execution of budget expenditure throughout the year, particularly public investment. This would enable a more efficient use of public resources,” Ahmetaj said.

She warned that emigration, population ageing and a declining working-age population were expected to increase pressure on social security and health insurance schemes, posing further challenges to the sustainability of public finances.

“Adverse demographic trends, including emigration, population ageing and a shrinking working-age population, are expected to place additional pressure on social security and health insurance schemes, further challenging the sustainability of public finances. This highlights the need for reform,” she said.

The central bank is encouraging changes to the pension system to ensure a sustainable balance between benefits and the scheme’s financial capacity, Ahmetaj said.

She also called for consideration of adjustments to the public pension scheme, a broader contribution base and the development of supplementary pension arrangements. Demographic data should also be incorporated more systematically into fiscal planning, she added.

Ahmetaj further stressed the importance of strengthening fiscal risk management amid economic uncertainty, urging closer monitoring of the impact of economic developments and changing financing conditions on public debt and budget indicators.

“Strengthening mechanisms to identify and manage fiscal risks is important in an economic environment characterised by uncertainty. Particular attention should be paid to debt and financing costs,” she said.

“Less favourable economic developments and changes in financing conditions could affect budget indicators and the trajectory of public debt, and their potential impact warrants particular attention,” Ahmetaj added.

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In a statement, the Bank of Albania said it was closely monitoring recent developments, stressing that the safety of citizens, bank customers and financial institution employees remained a priority.

“Payment services have continued to operate normally and without interruption, ensuring that the banking system can support business activity and meet households’ consumption needs,” the central bank said.

Damage to physical infrastructure at some bank branches did not affect the security of customer deposits or the financial stability of banks, it added, urging citizens not to worry about their savings.

The central bank said it remained in close contact with commercial banks and relevant institutions to monitor the situation and measures taken to protect employees, customers and banking infrastructure.

Temporary restrictions on services at certain branches were necessary to ensure the physical safety of staff and customers. The bank urged citizens and businesses to follow official notices from their banks and make greater use of alternative banking channels.

“The banking system is a vital pillar of the economy and citizens’ daily lives,” the statement said, noting that banks support households managing their savings, people receiving salaries and pensions, businesses paying employees and companies investing and creating jobs.

The Bank of Albania said it would continue to fulfil its mandate to maintain price and financial stability and ensure the safe and reliable operation of the banking system.

It also called on citizens exercising their right to peaceful protest to respect and protect the central bank, commercial banks, their premises, infrastructure and employees.

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According to INSTAT data, economic activity expanded by 3.6% in the second quarter, broadly in line with, though slightly below, the pace recorded in the previous quarter.

Growth was driven mainly by stronger consumption and investment, while net exports made a marginal positive contribution. Fiscal policy also continued to maintain a consolidating stance.

By sector, growth was supported mainly by construction and services, while industrial and agricultural activity continued to contract, Sejko said.

“Available data suggest a similar economic performance in the third quarter,” he said.

The improvement in economic activity has also been reflected in the labour market. The unemployment rate fell to 8.3% in the second quarter, close to its historic low, while employment in the non-agricultural private sector rose 2.3%.

Average wages increased 11.5% year-on-year during the quarter.

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The indicator stood 7.8 percentage points above its historical average, supported mainly by stronger confidence in construction and among consumers.

Construction confidence rose 6.6 percentage points, putting the indicator 18 points above its long-term average, driven by more positive assessments of current activity and order books.

Consumer confidence increased by around 2.3 percentage points to about five points above its historical average. Consumers were more optimistic about their financial situation and the country’s future economic outlook, while assessments of current and expected purchases of big-ticket items also improved. Expectations for future overall price levels were revised down.

Confidence weakened in the other business sectors. The indicator fell 3.8 percentage points in industry, 2.4 points in services and 1.8 points in trade.

Despite the declines, confidence in all three sectors remained above historical averages, by around three percentage points in industry, five points in services and 10 points in trade.

The September data showed a modest improvement in business and consumer perceptions of economic conditions, with construction and consumers making the main contributions to the rise in overall economic sentiment, the central bank said.

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Foreign investment in real estate reached 610 million euros in January-June, up 141% from the same period in 2025. It accounted for more than half of total foreign direct investment during the period.

In the second quarter alone, real estate investment reached 438 million euros, the highest quarterly figure on record, up 194% year-on-year.

The surge in property investment has been linked to major development projects, particularly in tourist areas, as well as increased purchases by non-resident buyers.

Bank of Albania survey data showed that around one in five homes sold in the first half of the year were bought by non-residents. About 85% of those buyers were citizens of European Union countries.

Foreign capital also flowed into the financial sector, which attracted 181 million euros, up 23% year-on-year. Manufacturing drew 92 million euros, trade 67 million euros and energy 66 million euros, while information and communications attracted 48 million euros.

Overall, foreign direct investment rose 50% from the first half of 2025 to its highest level on record for the period, the central bank said.

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Preliminary official fiscal data, released by the Agency for Media and Information on Friday, showed that revenue from these contributions reached 100.4% of the target set for the first eight months of the year.

The increase in contribution revenue coincided with an expansion in business activity. Business turnover rose by 277 billion leks in January-August compared with the same period in 2025.

The fiscal data indicate that the figures reflect improved labour-market performance, higher reporting of actual wages and more effective tax administration.

The performance in the first eight months of the year points to a broader contribution revenue base as business activity continues to expand, the data showed.

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The central bank said businesses had improved their financial position, with their net debtor position relative to gross domestic product falling to 108% at the end of 2025, from 118% in 2020-2021.

The stronger performance has also been accompanied by increased bank financing. In the first half of 2026, business lending was supported by higher financing for investment and in foreign currency, while the average interest rate on new loans in lek and euros was around 6%.

The Bank of Albania said businesses’ solid financial performance had helped ease their debt burden. Its surveys showed that most businesses operated at a profit, while sales continued to perform positively, particularly among large companies and in the construction sector.

Lending to households also expanded, rising by around 17% year-on-year in the first half of 2026. Housing loans, mainly in national currency lek, accounted for the largest share of the increase.

The growth in lending was also supported by easier credit standards and a higher approval rate for loan applications, reflecting improved access to financing for businesses and households.

Foreign direct investment recorded particularly strong growth in construction, real estate and wholesale and retail trade, the central bank said.

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The central bank’s survey showed that its Fisher House Price Index was unchanged from the second half of 2025 but rose 10% year-on-year.

The annual increase was significantly lower than in previous periods, after prices rose 28% in the second half of 2025 and 41.7% in the first half of that year.

In Tirana, house prices rose 10% from the second half of 2025 and were up 9% year-on-year.

Demand remained active, with the number of unsold residential and commercial properties continuing to decline for several consecutive six-month periods.

However, the average time needed to sell a property increased nationwide to 9.9 months from 9.1 months previously. In Tirana, the average rose to 9.7 months from 8.1 months.

In coastal areas, by contrast, the average selling period fell to 8.2 months from 9.9 months, while in other areas it edged up to 10.6 months from 10.1 months.

Bank lending remained an important source of financing, with agents reporting that about 58% of residential and commercial properties sold through their agencies were purchased using bank loans. In 34% of cases, loans covered up to 60% of the property value.

Non-resident buyers accounted for about 20% of residential property purchases in the first half of 2026, with EU citizens making up around 85% of foreign buyers. The central bank said the share of transactions involving non-residents has been rising over the past five years.

Most transactions continued to be completed at the initial asking price or with discounts of up to 5%, while larger price reductions remained uncommon.

Real estate agents also reported positive expectations for the market in both the short term and over the next two years.

The survey covered 230 real estate agencies and construction companies whose sales represent around 75-80% of the total turnover of businesses operating in the sector.

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The figures were discussed at a meeting between central bank Governor Gent Sejko and chief executives of commercial banks, also attended by Economy and Innovation Minister Delina Ibrahimaj.

The talks focused on developments in the banking sector, credit growth, the property market and issues related to financial stability and the development of the financial system.

Sejko said the pace of lending was supporting consumption and investment, while stressing that credit growth should remain prudent and sustainable, backed by appropriate lending and risk-management standards.

Mortgage lending rose 16.1% year-on-year in the first half, while the average interest rate on lek-denominated mortgages stood at 3.9%.

The meeting also reviewed the Bank of Albania’s macroprudential measures governing housing finance, including limits on loan-to-value and debt-service-to-income ratios. Sejko said the measures had contributed to more prudent and balanced lending in the housing market.

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The issue was discussed at a meeting in Tirana between Bank of Albania Governor Gent Sejko and Francis Malige, EBRD Managing Director for Financial Institutions.

The meeting was also attended by Grzegorz Zielinski, EBRD Managing Director for Southeast Europe; Ekaterina Solovova, EBRD Head of Montenegro; and Hannes Takacs, Head of the EBRD office in Albania.

The talks followed the launch in Albania of the “We Finance Code” initiative, organised jointly by the Bank of Albania and the EBRD.

The two sides discussed recent developments in Albania’s banking sector, cooperation between the central bank and the EBRD, and the role of the financial system in supporting economic development and the country’s EU integration process.

Particular attention was given to the Bank of Albania’s programme to finance micro and small businesses, aimed at improving their access to funding and supporting investment and business activity. EBRD representatives welcomed the programme and said the bank was ready to support the central bank’s initiative and explore concrete opportunities for cooperation in its implementation.

The meeting also covered support for Albania’s Deposit Insurance Agency and the importance of continuously strengthening financial safety mechanisms. The parties welcomed EBRD cooperation and assistance in strengthening institutional capacity and aligning with international and European best practices.

Sejko said EU integration remained a strategic priority for the development of Albania’s financial sector, calling for continued reforms, regulatory alignment and higher standards in the functioning of financial markets.

Malige welcomed the cooperation with the Bank of Albania and progress in the country’s banking sector, expressing the EBRD’s readiness to continue supporting reforms and initiatives aimed at developing the financial sector and financing the real economy.

Sejko and Malige reaffirmed their commitment to deepening cooperation, particularly in areas related to European financial integration, financial stability and improved access to financing for Albanian businesses.

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