The Governor of the Central Bank of the Republic of Kosovo, Fehmi Mehmeti, presented to the media the developments in the financial sector during 2021, stating that despite the difficulties, the CBK has managed to achieve its objectives this year, ensuring a sound financial system which not only managed to withstand the unfavourable economic developments in the country, but also to be one of the main pillars of support for businesses and individuals, and thus the country's economy.
He said that based on the CBK estimates, Kosovo will mark an economic growth of about 9.9 percent.
“Based on data recorded until October this year, the expenditures of non-residents in Kosovo, most of which are from the diaspora, amounted to EUR 1.33 billion, which represents an increase of 151.3 percent compared to the same period in the last year. Also, 2021 marked a faster growth rate for remittances sent by the diaspora in Kosovo, where the value of remittances received until the end of October is EUR 956 million, which represents an annual increase of 20.0 percent. The increase in domestic demand in Kosovo during this year was reflected in a higher value of imports of goods, which in November 2021 marked the value of EUR 4.2 billion or an annual increase of 42.5 percent. On the other hand, exports of goods amounted to EUR 684.7 million, marking an annual increase of 60 percent. As a result of these developments, the trade deficit in the goods account until November 2021 recorded the value of EUR 3.5 billion, which represents an annual increase of 39.6 percent,” Governor Mehmeti said.
There was also an increase in exports of services, which until September 2021 marked the value of EUR 1.59 billion, or an annual increase of 117 percent and this has occurred mainly as a result of increased visits of our diaspora and tourists in the country.
Imports of services until September 2021 recorded a value of EUR 642 million, while total imports of goods and services until November amount to about EUR 5 billion, while exports of goods and services are about EUR 2.3 billion.
Foreign direct investment until September amounted to EUR 389 million, compared to the value of EUR 254 million recorded until September 2020. During this period, FDI in real estate investments marked a high increase, amounting to EUR 265 million, while in the same period EUR 129 million were recorded, which represents an increase of 106 percent. On the other hand, investments in the financial services sector stood at about EUR 87 million, compared to the value of about EUR 67 million recorded during the same period of the last year.
The average inflation rate until November 2021 marked the rate of 3.1 percent compared to the annual average of 0.2 percent for 2020, the inflation rate only for November 2021 was 6.9 percent, which shows that we are facing an increasing trend of the level of overall price. The increase in the inflation rate in Kosovo mainly reflects the increase in prices in international markets, which in Kosovo are transmitted through the increase in prices of imported goods.
On the other hand, the financial system has continued to be sound and able to withstand a very unfavourable economic environment during 2020, but also to take a very important role in supporting the economy to cope with the crisis with the smallest consequences possible.
In addition to measures to support the economy and businesses with the loan moratorium without any punitive measures for all borrowers who have been adversely affected by the pandemic, the CBK extended the application deadline until the end of March 2021, based on the loan restructuring guide.
“Until November 2021, the value of new loans issued by the banking sector was about EUR 1.6 billion, which represents an annual increase of 21 percent, while the total value of active loans in the banking sector was EUR 3.7 billion, which represents an annual growth of 14.7 percent. Assets of the banking sector have continued the growth trend during this year, reaching the value of EUR 5.79 billion, which represents an annual growth of 13 percent. Thanks to public trust, we have had an increase in deposits, which until November 2021 amounted to about EUR 4.67 billion, which represents an annual increase of 12.8 percent. The growth rate of total deposits is mainly dictated by household deposits, a category that dominates the structure of total deposits in the banking sector with a share of 69.6 percent in total deposits, which until October 2021 marked an annual increase of 18 percent,” the Governor said further.
He announced that the average interest rate on loans in November 2021 was 5.6 percent, which is lower than the rate of 6.1 percent recorded in November 2020. The good quality of the loan portfolio with a non-performing loan rate of only 2.3 percent in November 2021, while the coverage of non-performing loans with loan loss provisions remains at a high level of 147.8 percent, which indicates adequate levels of provisions in the banking sector.
The banking sector continues to have a high capital adequacy ratio of 17.5 percent at the end of October, which continues to be significantly above the minimum regulatory level of 12.0 percent.
The liquidity position of the banking sector remains at a high level, where the ratio of liquid assets to short-term liabilities in July was 38.4 percent, which is higher than the required regulatory minimum of 25.0 percent.
There were also positive developments in the insurance sector, where the assets of this sector until September of this year marked the value of EUR 235.7 million, marking an annual increase of 10.0 percent. Thanks to the requests of the CBK, the equity of the insurance sector has increased, which until September was EUR 61.1 million with an annual increase of 5.9 percent. During the same period, profits amounted to EUR 5.9 million, gross written premiums by insurance companies amounted to EUR 86.9 million, an annual increase of 20.2 percent, while gross paid claims amounted to EUR 45.6 million or an annual increase of 30.0 percent.
As a result of the difficult financial situation and non-compliance with legal requirements for capital, the CBK revoked the license of the insurer “Kosova e Re”.
There were also positive developments in the pension sector, where the total value of assets in October reached EUR 2.29 billion compared to 2.07 billion in October 2020, which corresponds to an annual increase of 10.7 percent.
Return on investment was EUR 133 million, while new pension contributions amounted to about EUR 157 million.
Assets of microfinance institutions and non-bank financial institutions until November 2021 amounted to EUR 343.1 million, marking an annual increase of 8.6 percent, total active loans of this sector in November marked the value of EUR 238 million, or annual growth of 16.1 percent.
The average interest rate on new loans issued by microfinance institutions in November 2021 was 18.8 percent, which in the same period last year was 19.7 percent. Even in this sector, the good quality of the loan portfolio is assessed, with a non-performing loan rate of 2.9 percent.
The CBK has continued even during 2021 the advancement and development of its professional capacities in all it scopes, where despite the created situation and not very favourable conditions in international markets, the CBK has managed to maintain its financial stability and good performance of the institution, generating a positive financial result.
The CBK has continued with the announcement of the already traditional competition for the “Young Economist” award, an activity that aims to promote research activity in the field of economics among young people.
Based on the evaluation of the professional commission for the works provided, I have the pleasure to announce the winner of this award, Erzana Uka, with the topic “Impact of digitalization on the banking system”.