Private Consumption, Investments Will Drive Economic Growth in 2017
Albanian Daily News
Published November 10, 2016

The Bank of Albania estimates
that economic activity in Albania will continue to grow during this period and
will return to equilibrium over 2017. Private consumption and investments will
drive economic growth, the Governor of the Bank of Albania Gent Sejko declared
Wednesday while presenting quarterly monetary policy.

On the other hand, he said that foreign
trade is expected to have a secondary role in growth and fiscal policy is
expected to remain consolidated.

The return of the economy to equilibrium
and the stabilisation of the external environment will establish the conditions
for a progressive increase of inflation in the medium term. Annual inflation is
expected to reach 2.3% four quarters ahead and return to target over 2018,
Sejko said.

Taking into account the expected fiscal
consolidation, these forecasts are conditional on a consistent implementation
of an accommodative monetary policy over this period.

The Albanian economy continued to
improve over the last two quarters, he added. Economic activity grew
progressively. Inflation is gradually moving towards the target, while
financial markets remain calm and financing costs remain at their lowest
historical levels. These tendencies reflect the Bank of Albania's accommodative
monetary policy stance, the improved confidence in the economy and eased shocks
from the external environment.

The new information analyzed in this
monetary policy report has resulted, overall, in line with our expectations. In
this updated round of medium-term projections expected trajectories of economic
growth and inflation have not changed.

Against this backdrop, the Supervisory
Council estimates that the current monetary policy stance is adequate to meet
our objective.

In the third quarter, inflation averaged
1.9%, up compared to the low values recorded in the previous two quarters.
Inflation fell at 1.5% in October. The increase of inflation during the third
quarter and its fall in October were affected by the inflation fluctuations of
food and oil.

The rise in inflation during the second
half of year reflects the strengthening of inflationary pressures from the
domestic demand and the reduction of disinflationary pressures from abroad. The
expansion of economic activity in Albania drove to the increase of employment
and decrease of unemployment. The gradual shift of economy towards equilibrium
paves the way for an increase in wages and production costs in the medium-term
horizon. These trends sustain the upward trend in core inflation. INSTAT data
for the second quarter of the year indicated the Albanian economy had grown at
3.2% annually. Available data suggest that the economic growth in the third and
fourth quarters will remain at similar rates.

Based on the above analysis and forecasts,
the Supervisory Council estimates that the current monetary policy stance is
adequate to meet BoA's inflation target.

Against this backdrop, the Supervisory
Council decided to: keep the policy rate unchanged at 1.25%; keep the rates for
the overnight deposit and loan facilities unchanged at 0.25% and 2.25%,

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