2012 H1 Bulletin of Bank of Albania Bulletin of Bank of Albania 2012 H 1 BULLETIN OF THE BANK OF ALBANIA 2012 H1 PB Bank of Albania Bank of Albania 1 2012 H1 Bulletin of Bank of Albania Bulletin of Bank of Albania If you use data from this publication, you are requested to cite the source. Published by: Bank of Albania Sheshi “Avni Rustemi”, Nr. 24, Tirana Tel: 355-4-241 93 01/2/3; 355-4-241 94 01/2/3 Fax: 355-4-241 94 08 E-mail: [email protected] www.bankofalbania.org Printed in: 370 copies 2 Bank of Albania Bank of Albania 3 2012 H1 Bulletin of Bank of Albania Bulletin of Bank of Albania 2012 H 1 C O N T E N T S Editorial Albania - International Monetary Fund Relations 5 Addresses and Presentations by Bank of Albania’s Administrators in Activities in Albania and Abroad 9 Periodic Analyses 65 Analysis of financial intermediation, 2012 Q1 66 Erjona Suljoti, Sofika Note Information on selected economic and monetary indicators in the Central 74 Eastern and South Eastern European countries, 2012 Q1 Doriana Lama, Medvin Shehu Analysis of developments in the external sector of the economy 2011 Q4 85 Merita Boka Research Papers 96 Constructing a composite leading indicator for Albania 97 Ermelinda Kristo, Delina Ibrahimaj House Price Index -Methodology and use- 113 Ermelinda Kristo, Elona Bollano House prices and mortgage loan - Empirical evidence for Tirana 131 Erjona Suljoti, Gent Hashorva Bank of Albania News, January-June 2012 153 Monetary Policy Decisions 157 Legal News, January-July 2012 158 Bank of Albania Management, as at 30 June 2012 169 Banks and Branches of Foreign Banks Licensed by the 170 Bank of Albania, as at 30 June 2012 Publications Issued by the Bank of Albania over 2012 H1 174 2 Bank of Albania Bank of Albania 3 2012 H1 Bulletin of Bank of Albania Bulletin of Bank of Albania 4 Bank of Albania Bank of Albania 5 2012 H1 Bulletin of Bank of Albania Bulletin of Bank of Albania 2012 H 1 EDitorial ALBANIA - International MonetarY FUND Relations ALBANIA’S MEMBERSHIP IN THE International MonetarY FUND The International Monetary Fund (IMF), an organization of 188 countries, guided by the purposes set forth in the Articles of Agreement, works to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. The IMF’s financial resources come mainly from each member country’s quota, which is based broadly on the relative size and economic strength of the country. Albania joined the IMF on October 15, 1991 upon the adoption of the IMF Membership Resolution for Albania. At the moment of its subscription, Albania’s member country quota was SDR 25 million. Its quota increased to SDR 60 million in January 2012, as a result of the entry into force of the 2008 Quota and Voice Reform of the IMF. Currently, with its increased quota, Albania has 1.341 votes (or 0.05 percent of total voting shares of all IMF’s members). Quota increase through the years Payment date for quota increase Quota October 15, 1991 SDR 25,000,000 November 30, 1992 SDR 35,300,000 January 29, 1999 SDR 48,700,000 January 20, 2012 SDR 60,000,000 Box: Membership in the International Monetary Fund For many years, Albania has been an isolated country, hardly recognised internationally due to its totalitarian regime. In early 1991, upon the change in the political system, Albania became a member of various international organizations like the IMF. Prior to joining the IMF, Albania was characterized by poor economic conditions, poverty and low living standards. In this context, membership in the Fund would direct the country toward the objective of implementing economic development strategies for transitioning from a centrally- planned to a market-based economy. The first arrangement signed with Albania aimed at its macroeconomic stabilization and structural transformations towards a market-based economy. Hence, membership in the Fund was regarded as an important step for Albania. 4 Bank of Albania Bank of Albania 5 2012 H1 Bulletin of Bank of Albania Bulletin of Bank of Albania Furthermore, membership in the Fund provides benefits to the economy, since it promotes international monetary cooperation, confidence in other financial institutions and financial markets, economic security to foreign investors, and access to investment loans. In addition to benefits, each IMF member country must comply with the provisions under the Articles of Agreement and established rules. They must also pay the quota, which determine its maximum financial commitment to the IMF, its voting power, and its access to IMF financing. IMF-supporteD PROGRAMS FOR ALBANIA The IMF provides financial assistance to a country that cannot find sufficient financing to make its international payments. For this reason, the Fund has created and developed a wide range of instruments or facilities tailored to address specific needs of its member countries. IMF loans are meant to help member countries tackle balance of payments problems, stabilize their economies, and restore sustainable economic growth. Also, the IMF provides concessional lending facilities to low-income member countries in order to develop their economy and reduce their poverty. The first IMF lending instrument for Albania was the 12-month Stand-By Arrangement signed on August 26, 1992, equivalent to SDR 20 million, disbursed in three tranches. Repayment of this loan was made within 3 ¼ - 5 years of disbursement and ended in 1998. Further to the Stand-By Arrangement, in July 1993, the IMF Executive Board approved a three-year loan for Albania under the Enhanced Structural Adjustment Facility (ESAF), equivalent to SDR 42,360,000, to support the 1993-1996 economic and financial programme, of which only SDR 31,060,000 were drawn. On November 23, 1997, in the aftermath of the unrest, the IMF Executive Board approved a loan for Albania, equivalent to SDR 8,825,000, under the IMF’s Emergency Post-Conflict Assistance (EPCA). Principal repayment on this loan was made in eight quarterly instalments, beginning five years after the loan disbursement. Albania was granted an IMF three-year Poverty Reduction and Growth Facility (PRGF) loan, (1998-2001), equivalent to SDR 45 million (disbursed in 8 tranches), which was followed by a new IMF three-year PRGF loan (2002- 2005), equivalent to SDR 28 million (disbursed in 7 tranches). On January 27, 2006, the IMF approved the last three-year PRGF/EFF (Extended Fund Facility) arrangement for around SDR 17 million, which was disbursed in 7 tranches. The PRGF/EFF arrangement ended on January 31, 2009. 6 Bank of Albania Bank of Albania 7 2012 H1 Bulletin of Bank of Albania Bulletin of Bank of Albania 2012 H 1 IMF-supported programmes for Albania (01.05.1984 – 30.04.2012) in 000/SDR Amount Type of Arrangement Approval Date Expiration Date Amount Drawn approved EFF 01.02.2006 31.01.2009 8,523 8,523 ECF 01.02.2006 31.01.2009 8,523 8,523 PRGF 3 21.07.2002 20.11.2005 28,000 28,000 PRGF 2 13.05.1998 31.07.2001 45,040 45,040 ESAF (PRGF 1) 14.07.1993 13.07.1996 42,360 31,060 EPCA 12.11.1997 8,825 8,825 STAND BY 26.08.1992 14.07.1993 20,000 13,125 Total 152,445 143,095 ALBANIA’S RELATIONS WITH THE IMF UNDER ARTICLE IV Upon completion of the three-year PRGF/EFF arrangement in 2009, Albania's relations with the IMF have focused on Article IV consultations of the IMF’s Articles of Agreement. Article IV consultations are part of IMF surveillance. An Article IV mission visits the country every year or every two years to gather information and exchange views with local authorities. Conclusions of the mission are presented in a staff report submitted to the Executive Board, highlighting any potential risks to stability and economic growth, at the same time, providing advice on necessary policy adjustments. The latest Article IV consultation was conducted by an IMF mission that visited Albania in June 2011. Since 1999, nine IMF missions under Article IV consultation with Albania have taken place. Their reports were published, respectively, in 1999, 2000, 2001, 2003, 2005, 2006, 2008, 2010 and the last one in 2011. The published conclusions of the last mission (June 2011) under the Article IV consultation with Albania, highlight that: 1. The Albanian economy has shown admirable strength in the recent past. Albania has weathered the 2009 global financial crisis well, owing to sound policies implemented during the pre-crisis years. 2. The financial system overcame heightened stress in the immediate aftermath of the crisis and avoided a credit bust, though asset quality declined. 3. Throughout, inflation remained well anchored. The needed rebalancing of the economy has begun, with the exports picking up and the high current account deficit narrowing. 4. The monetary policy framework of an inflation target and flexible exchange rate is a fundamental strength of the Albanian economy. However, IMF experts underlined the need for a good combination of macroeconomic policies to anchor inflationary expectations and maintain growth prospects. 5. Directors commended the resilience of Albania’s banking system during the crisis, although cautioned that heightened risks, including from possible regional spillovers, called for macro-prudential policy. 6 Bank of Albania Bank of Albania 7 2012 H1 Bulletin of Bank of Albania Bulletin of Bank of Albania A key near-term priority is the swift resolution of the high level of non- performing loans. Directors encouraged the authorities to continue to enhance the monitoring of banks and the development of the local currency market.