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Deposits of individuals, businesses and other institutions in the banking system marked another increase in January, reaching a new historical record level.
According to the statistics of the Bank of Albania, the stock of savings in banks at the end of January 2022 was 1.23 trillion ALL, or more than 10 billion euros. Compared to December, savings increased by 1.5%, or ALL 18 billion more.
All growth has come from the currency, while savings in lek marked a slight decline. Foreign currency deposits expanded by 2.7% (+18 billion ALL) compared to the end of last year. The increase in foreign currency deposits came from both individuals and businesses.
In contrast, businesses and non-financial public institutions reduced their lek deposits, while for individuals the stock remained almost unchanged.
On an annual basis (compared to January 2021), bank deposits increased by 10.8%, or ALL 120 billion (almost EUR 1 billion) more. Over 80% of this growth has come from foreign exchange, driven by both businesses and individuals.
Historical data of the Bank of Albania show that the growth of savings in banks has accelerated significantly in the last two years (2020-2021), as in the period 2017-2018 marked a decline for the first time in the history of post-transition and significant slowdown in 2013 -2016. During the pandemic year savings were driven by the local currency, as individuals did not have much opportunity to spend, while in 2021 it was the currency that led the growth.
However, lek savings are also increasing in the last three years, after their decline which was driven by the easing of the monetary policy of the Bank of Albania from 2011, with the continuous reduction of interest rates. This made individuals reluctant to deposit long-term savings. Monetary policy is now expected to change, as a result of high inflation, which could make the Bank of Albania raise the key interest rate for the first time in a decade, which will be reflected in higher returns for deposits in local currency.
The currency remains the most preferred currency for saving, influenced by emigrant inflows as well. In January 2022, about 55.2% of savings were in foreign currency, mainly in euros, from 53.6% in the same period a year earlier./Monitor
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