Governor Ismaili unveils the annual presentation for 2023 to the media

28/12/2023

The country’s financial system is steady, stable, liquid and well capitalized, the quality of assets is adequate. Financial mediation has increased, while access to finance needs to be expanded, with emphasis on it under the most competitive and affordable conditions said the Governor of the Central Bank of the Republic of Kosovo, Ahmet Ismaili, during the annual reporting before the media, organized on the eve of the end of the year.

According to the CBK, economic growth for 2023 in Kosovo regarding macroeconomic indicators is expected to be 3.4 percent, while for 2024, a higher growth of 4.2 percent is expected, mainly supported by domestic demand and export. Similarly, CBK’s projections for the rate of inflation in the last quarter suggest a slowdown to 2.9 percent, while the average for 2023 is expected to be 5.1 percent.

Regarding the challenges in the country's economy for the following years, according to Governor Ismaili, given the visa liberalization in 2024 and the dilemmas raised about the potential impacts on the workforce (labor market) and the economy in general, the Central Bank of the Republic of Kosovo has included this impact in the assumptions of the baseline scenario of GDP projection for 2024 and 2025. CBK’s assessments consist in low impact in short periods of time, while similar to the countries of the region, practices suggest that businesses try to neutralize this impact on the labor market.

Regarding the export and import of goods and services, the head of the CBK added that for January-September 2023, the value of imports reached 5 billion and 271 million euros, while the value of exports was 3 billion and 61 million euros.

“The trade balance of services was constantly positive and until September 2023, it marked the value of 1 billion and 398 million euros (2,419.9 - 1,021.5), which is 20.8 percent higher compared to the same period of 2022, which was 1 billion and 158.1 million euros (2,040.6 - 882.6). The export of services for January-September 2023 reached the value of 2.4 billion euros, an increase by 19 percent, compared to the same period last year. A key role in this growth of this category played the revenues from travel services, computer, information and telecommunication services that have seen continuous growth in recent years,” Governor Ismaili added.

Governor Ismaili said that it is the first time that remittances exceeded the value of 1.2 billion euros by November 2023.

“The remittances received by the end of 2023 are expected to reach the value of 1.3 billion euros, marking an annual increase of 10.5 percent. The CBK foresees that in 2024, these will mark an increase of 6.0 percent and 6.1 percent in 2025”, Governor Ismaili emphasized.

By the end of the third quarter of 2023, Foreign Direct Investments reached the value of 621.3 million euros, of which 368.8 million euros are in the real estate sector. According to CBK projections, FDIs for 2024 are expected to be 792 million euros, while a year later it is projected that they could reach 846.7 million euros.

According to Governor Ismaili, the indicator of non-performing loans (NPL) was recorded at 2 percent by the end of November 2023.

“The total assets of the financial system in the country reached 10.62 billion euros, with the share of banks being 67.89 percent, followed by pension funds with 24.96 percent, MFIs and NBFIs with 4.33 percent and insurance companies with 2.83 percent. By the end of November 2023, deposits in the banking sector reached 5.88 billion euros, loans 4.88 billion euros, with a loan/deposit ratio of over 83 percent,” Governor Ismaili said to reporters.

“The indicator of non-performing loans (NPL), in November 2023, is recorded at 2 percent, remaining at the same rate compared to December 2022. Enterprise loans, which make up 60 percent of loans in the banking sector, are recorded at a rate of non-performing loans of 2.4 percent, while household loans, which make up 37 percent of the sector, have a relatively low rate of non-performing loans, i.e., 1.4 percent. Therefore, the banking sector has managed to have a satisfactory management of credit risk, also through the high rate of coverage of non-performing loans with reserves for loan losses”, Governor Ismaili added.

The data show that the number of transactions increased, which, according to the CBK, is a positive trend towards digitalization of financial services.

“The payment system in the interbank payment system of the CBK recorded an increase in the number of transactions of about 7 percent, from 15.8 to 16.9 million transactions, reaching the value of 19.4 billion euros by the end of November 2023, compared to 18.1 billion euros of the previous year. The number of POS transactions increased from 22.48 million to 30 million transactions, while in ATMs from 18.1 million to 19.3 million transactions. A significant increase was also noted in the number of accounts as well as e-banking accounts, such as the number of terminals and the number of transactions for electronic money, which indicates the positive trend towards digitalization of financial services”, said the Governor of CBK.

In the press conference, Governor Ismaili pointed out that there was a development and expansion of the activity of financial mediation.

“As for other financial sectors, there was a development and expansion of financial mediation activity, supporting access to finance and competitiveness. Non-bank financial institutions with the new regulatory changes will have increased opportunities to compete and provide payment account services, which, in addition to the basic bank account, will constitute an additional opportunity. The amendments to the legislation will give impetus to this sector, in accordance with the new Strategic Plan of the CBK”.

“The insurance sector reached the asset value of 300 million euros, and despite the improvements, there is still a need for advancement and consolidation, both in terms of the quality of assets and capital, regulatory requirements, as well as the expansion of the range of products and services, the quality of services and financial protection, where even more progress is required”.

“The value of the assets of the pension sector reached 2.65 billion euros in November 2023, marking an annual increase of 196.1 million, which coincides with an annual increase of 8 percent. This sector is closing the year with a positive return in the amount of 41.6 million euros”, Governor Ismaili pointed out.

Speaking about the supervisory and regulatory orientations of the CBK, Governor Ismali highlighted that the new Draft Law on Banks, the country's top financial institution will be the authority for licensing, supervision, consumer protection and the authority to close banks.

“In the framework of licensing, banking and financial activities, criteria for licensing key activities and positions of bank governance were expanded. Consumer protection and the quality of financial services with full transparency and disclosure will be an important part of this law”, Governor Ismaili singled out.

In the framework of the advocacy and internationalization of CBK and the financial sector, Governor Ismaili indicated that dozens of meetings were held with embassies and international representations as well as international financial institutions operating in the Republic of Kosovo.

“The meetings had the character of the commitment to become part of the International Payment Platforms, the commitment to support the requests so that the citizens of the Republic of Kosovo have the opportunity to travel without obstacles through the Green Card and the possibility of increasing cooperation with regulatory authorities”, said Governor Ismaili.

Similarly, Governor Ismaili said that during this year, CBK joined the Reserve Advisory and Management Partnership Program (RAMP) with the Treasury of the World Bank and the Sustainable Banking and Finance Network (SBNF).

“CBK applied to join the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) and that efforts are being made to join CEF. There was an agreement for technical assistance with ECB, The IMF and the various central banks, especially the cooperation of the CBK with the Banca d’Italia for Target Instant Payment Settlement (TIPS) should be emphasized”, Governor Ismaili said.

Within the framework of the developed activities, Governor Ismaili disclosed to the representatives of the present media some of the actions taken against the phenomenon of counterfeit money in the market of the Republic of Kosovo, adding that this is a permanent war that requires continuous commitment and inter-institutional coordination.

“Among the measures recently taken by the CBK, a decision was made to eliminate the fees applied so far for the deposit of coins by commercial banks in the CBK, bearing the cost of this activity, in order to facilitate and stimulate withdrawal from the market (deposit in banks) of the most outdated coins. Also, commercial banks have been asked to remove the fees applied to businesses for depositing coins in banks, actions carried out during these days, including the supply from the CBK to commercial banks with coins of the denomination of 2 (two) new euros, among others, to put the same into circulation”, said Governor Ismaili.

The head of the CBK has indicated that by the end of November 2023, the Complaints Division has reviewed 720 complaints from users of financial services.

“Total complaints for commercial banks addressed to CBK are 407, followed by insurance companies with 221, while complaints against MFIs and NBFIs for this period were 76”, said Governor Ismaili.

With the new organizational structure, the CBK established the Department for Consumer Protection and Supervision of Financial Sector Practices, a function which is expected to be further strengthened, along with many new regulatory requirements, with the new Law on Banks expected to be approved during 2024.

Financial education and inclusiveness will be at the center of focus both in terms of access to finance and in terms of quality, competitive and affordable services.

Finally, Governor Ismaili presented the points of the CBK Strategic Plan for 2024-2028, which has five main pillars:

1. Strengthening Durability and Financial Stability;

2. Capacity building, Commitment to staff, Digitalization and Modernization of Processes;

3. Modernization of the Financial Market infrastructure and Competitiveness;

4. Enhancing Consumer Protection, Financial Education and Financial Inclusion; and

5. Expansion of Cooperation, Involvement and Impact in the Areas of Responsibility.

At this event, the first three prizes within the CBK Award “New Economist” were also awarded, where, with the aim of encouraging and motivating research activity with their works, Qëndresë Cuci, Diellëza Mahmuti and Agnesa Demolli – Mehani.

Partnership with the media and transparency will accompany the CBK activity. On this occasion, the Governor thanked the media for the coverage and correctness in dealing with the topics of the financial system, as sensitive and influential topics in public perception.

“The messages of financial stability and those of financial education can be conveyed to the citizens in the best way in this cooperation”, concluded Governor Ismaili.