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| The hands of a woman who is counting a bunch of 5,000 lek banknotes are shown in front of the Bank of Albania |
Albanian businesses and citizens are increasingly preferring their credits to be in the Albanian currency. This has led to a significant increase in the share of loans in lekë (Albanian currency) compared to the total, reaching 46%, the highest historical levels.
A study by the Bank of Albania reveals that during this year, there has been a strong trend of shifting the loan portfolio for businesses from foreign currency loans, mainly in euros, to loans in lekë. The cause for this shift has been the difference in interest rate declines between lekë and euros, as well as the exchange rate premium. At the end of September, foreign currency loans were 1.3% less than a year earlier.
It turns out that loans in lekë increased by 16 billion lek during the first nine months of the year, with the effect of converting loans from euros to lekë becoming more pronounced from May onwards. At the end of September, lek-denominated loans for businesses marked an annual expansion of 7.6%, significantly higher than the average growth of 1% in the first half of the year.
Similarly to the trends observed in businesses, foreign currency loans for individuals have slowed down, decreasing by 13.9% in the third quarter, compared to an average of 21% in the first half-year. Individuals have also chosen to prepay a portion of their foreign currency loans, mainly in euros, and replaced them with loans in lekë.
The main factors supporting this shift have been the premium of the domestic currency, lower interest rates on mortgage loans in lekë compared to those in euros, as well as regulatory facilitations for changing currency without penalties. In parallel, loans in lekë for individuals have shown an improvement in growth rates, reaching 12.6% in the third quarter from 8% in the previous quarter.
Balkan countries continue to outperform Central European countries in terms of credit growth, and Albania ranks among the countries with still high credit growth rates.