The supervisory board of Albania’s central bank decided on August 28 to keep the base interest rate at the historic low of 3.50% after cutting it by 25bps in July, the bank said in a statement on its website. The decision is expected to create better conditions for the central bank to meet its mid-term inflation target, the statement reads.
The rate setters consider that the economic growth continues to develop below its potential, while the outlook remains weak. The future performance of the economy will be determined by low private consumption and investment activity, which results from reluctance of households and businesses to undertake long-term commitments. In addition, both domestic and external funding conditions, continue to be relatively tight.
Referring to fiscal policy, the central bank said that it has been expansionary in January to July 2013. Budget expenditure increased by 10.4% y/y in the period, mainly due to rising capital spending. At the same time, budget revenues declined by 2.6% y/y. The central bank noted that the government needs to maintain prudent fiscal policy by end-2013 in order to meet the deficit target.
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