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    Albania’s c-bank holds key rate at 1%

    Albania’s c-bank holds key rate at 1% Bank of Albania/All rights reserved.

    TIRANA (Albania), February 5 (SeeNews) – Albania's central bank said on Wednesday it has decided to keep its key policy rate unchanged at record low 1.0%.

    The interest rate corridor in the interbank money market will also be kept unchanged, set at 0.10% for the overnight deposit rate and at 1.90% for the overnight lending rate, Bank of Albania said in a statement following a meeting of its rate-setting supervisory council.

    The central bank last changed its monetary policy rate in June 2018, lowering it by 25 basis points to 1.0% amid strong appreciation of the lek currency which increased downside pressure on inflation.

    The available information indicates that the economic activity in the country was hit by last year's devastating earthquake but the disaster has not damaged the medium and long-term development trend, central bank governor Gent Sejko said in the statement.

    A 6.3 magnitude earthquake, the worst in decades, hit Albania on November 26, leaving 51 people dead and around 3000 injured.

    “The effects of the earthquake are expected to have a resultant slowdown in growth and inflation, but this slowdown is expected to be temporary and concentrated during 2020,” Sejko added.

    Average inflation in the fourth quarter was 1.3%, down from the previous quarter and remaining below the central bank’s target of 3%, the central bank governor noted.

    Economic growth accelerated to 3.8% year-on-year in the third quarter compared to the first half of the year, above the central bank's expectations, with the acceleration driven by the good tourist season and the reduction of the negative effect of the decline in electricity production, Sejko explained.

    The damage caused by the earthquake, increasing uncertainty and the focus on repairs are expected to cause a slowdown in some sectors, including tourism but the government's reconstruction programme is expected to have a positive effect, albeit not strong enough to offset the negative consequences of the earthquake.

    “This year's economic growth and average inflation are expected to be at rates comparable to 2019. On the other hand, overcoming the effects of the earthquake is expected to pave the way for faster economic and inflation growth in the next period,” Sejko said.

    In December, Albania's parliament adopted the 2020 draft budget targeting economic growth of up to 4.1%. 

    The World Bank said last month it has lowered its projection for Albania’s economic growth in 2020 to 3.4% from 3.7% projected in June last year. It estimated Albania's 2019 economic growth at 2.9%, down from 4.1% expansion in 2018.

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