Central bank noted that bank deposits and lending rate accelerated despite appreciation of the national currency, saying lending rose 11.1% year-on-year and 7.1% compared to the end of 2023.

According to the central bank, Albania’s banking system withstood shocks from both the internal and external environments, while capitalization remain stable and profits kept improving at satisfactory rate.

Albanian economy rose 3.6% year-on-year in the end of the first quarter of 2024, according to the central bank.

“Positive economic developments were driven by increased consumption and investments, as well as the performance of tourism sector. In the meantime, economic growth was associated with encouraging improvements in the labour market, with reductions in unemployment and increases in salaries,” Bank of Albania said.

The Bank’s fiscal policy kept the consolidating trend amid significant increase in fiscal revenue collections. Inflationary pressure kept declining and the inflation rate fell below the Bank’s 3% target and the key interest rate was cut accordingly.

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Central bank has found that Albania’s banking sector remained stable and secure in its operations during the first six months of this year.

“Bank deposits and loans expanded but growth rates were lower than in previous periods, reflecting the impact of the significant appreciation of the national currency Lek in the domestic exchange market. Amid higher interest rates, credit quality declined slightly, but non-performing loans (NPLs) remain at historic lows,” central bank said in its Financial Stability Report.

According to the Bank, the banking sector’s exposure to risks was controllable, but credit and market risks require continued monitoring. The banking sector’s resilience to risks is assessed as good with the capitalization indicators remaining at appropriate levels, while the financial performance improved significantly.

Likewise, economic activities remained an upward and positive trend during the first half of the year, mainly driven by growth in consumption and investment, and the improvements in the current account of the balance of payments in particular. Economic growth was accompanied by a decrease in unemployment.

Central bank notes that the fiscal policy maintained a consolidating trend amid a significant increase in fiscal revenues. Inflationary pressures decreased, but the inflation rate remained above the central bank’s target, increasingly reflecting the contribution of internal economic factors.

The Bank of Albania kept making efforts to normalize its fiscal policy, underlining that its further reaction would influence the determining factors of the inflation rate.

Central bank notes risks to the country’s economic and financial development are mainly related to the uncertainty of geopolitical events and international markets, but also to the progress of inflation and the impact of market risks.

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