Monetary Policy Report Q1 - 2014

Data for the first quarter of 2014 are generally in line with our previous assessments of the Albanian economy and financial situation. Weak aggregate demand continues to characterise the economy, further impacting almost all the economic and financial parameters in the country. In response to the weak aggregate demand, economic growth remains low and the Albanian economy continues to operate below its potential. The spare production capacities, both in the labour and capital market, are reflected in low increase of employment and production costs, followed by weak inflationary pressures. From the financial point of view, the weak economic growth puts upward pressure on the budget deficit and public debt, and creates financial difficulties for businesses. These difficulties are reflected in higher non-performing loans in the economy, and negatively affect the banks’ willingness to lend.