Annual Report 2010 03 August 2011 - Banka Qendrore e ...

Annual Report 2010
CBK
followed by China with a growth rate of 10.3 percent. Economic growth in these countries
was constantly supported by expansionary monetary and fiscal policies, high level of
domestic consumption and capital inflows.
During 2010, the fiscal policies, especially in developed countries, were oriented towards
the consolidation of budgetary expenditures, which previously marked a record high growth
as a result of efforts to ameliorate and prevent the financial crisis. The deterioration of
public finances was more significant in Eurozone, where some of the member states are
facing high budget deficit rates.
Countries like Ireland and Greece, being unable to refund the public debt, were forced to
ask for assistance from other countries and international financial institutions. In the
course of attempts to prevent the deepening of the budgetary crisis, in May 2010, the EU
member states decided to establish the European Financial Stability Mechanism. In order
for this mechanism to be functional, EU member states, European Central Bank (ECB) and
the IMF allocated an amount of euro 750 billion, which was designated to overcome the
potential budgetary crises. Moreover, the majority of the Eurozone member states have
initiated deep fiscal reforms, basing the fiscal consolidation in two areas: cutting down the
budgetary expenditure or achieving a balance between the decrease of revenues and
expenditures. However, the fiscal consolidation in some Eurozone member states by rapid
decrease of the government expenditures might bring about other consequences to the
economies of these countries, such as by slowing down the economic growth and increasing
the unemployment rate.
Financial sector in the global level continued to mark positive results during 2010, with a
significant support by expansionary monetary policies. The activity in the stock markets
during this year was characterized by a growing trend and lending to both the financial and
the real sector continued to grow, although at a lower level than before the financial crisis
emerged. Nevertheless, the problems of the Eurozone countries with public debt led to the
increase of investors’ uncertainty in financial markets. High rates of budget deficit in some
of the Eurozone countries negatively affected the credit ranking of these countries, and
consequently, the premium risks for Credit Default Swaps (CDS) and guarantees recorded
a considerable increase. Premiums for CDS of the countries like Ireland and Greece were
up to 5 pp higher than those of Germany, which are characterized with the lowest level of
riskiness. In addition, aiming at stabilizing and restoring the trust in the financial
markets, in May 2010, for the first time in its history, the ECB decided to intervene in the
bond markets, by buying state and private bonds, in order to influence the debt costs and
increase the liquidity in the markets. The ECB’s action was accepted with full optimism by
investors, since these measures helped in neutralizing the turbulences that had
overwhelmed the European markets.
Base interest rate in the Eurozone remained at the level of 1.0 percent, which is set since
May 2009, after the decision of the ECB to decrease it from 2.0 percent. In addition, the
marginal rate of lending and deposits remained unchanged at 1.75 and 0.25 percent,
respectively.
Also, the financing rates set by the USA Federal Reserve remained unchanged, ranging
from 0.00 to 0.25 percent. Whereas, interest rates in the interbank market marked an
increase during 2010, where three-month EURIBOR recorded a growth rate of 1.02 percent
(0.712 percent in December 2009) and the three-month LIBOR recorded a growth rate of
0.749 percent (0.605 percent in December 2009).
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