Financial Stability Report No1 20 December 2010 - Banka Qendrore ...

Number 1Financial Stability ReportCapital Adequacy Ratio at 11.3 percent, which is an increase of 1.5pp. In the eurozone, thisindicator increased by 1.1pp, reaching at 9.1 percent, while in the U.K. grew from 10.2percent to 11.5 percent. The increased rate of capitalization has mainly resulted from theinjection of capital by investors and positive profits. In order to assess the resilience of thebanking sector, a considerable number of banks in US and Europe were subject to thestress-test, where the results suggested that majority of banks were capable ofwithstanding a new wave of the crisis, whithout needing additional capital.2.1. Economic Developments in SEEEconomic activity in the SEE countries in the first half of 2010 has shown moderaterecovery. Economic recovery was mainly a result of increased exports from these countriesdue to the increase of the global demand during this period. Conversely, low domesticdemand in the SEE countries is reflected in unemployment growth and credit tightening.While most SEE countries have been characterized with positive economic developmentsduring 2010, Croatia and Montenegro reported continued economic contraction. Accordingto IMF latest projections, apart from Croatia and Montenegro, all SEE countries will recordpositive growth rates. The highest growth rate is expected to be in Kosovo (4.6 percent),followed by Albania (2.6 percent), Serbia (1.5 percent) and Macedonia (1.2 percent), whileBosnia and Herzegovina is expected to have modest growth of 0.5 percent.The improved performance of exports and the decline in imports during 2010 led to afurther reduction of the current account deficit in SEE countries. The 2010 IMF projectionsreport the lowest current account deficit in Croatia (3.8 percent), followed by Macedonia(3.9 percent) and Bosnia and Herzegovina (5.5 percent). The current account deficit isexpected to remain higher in Kosovo (18.5 percent), Montenegro (17.0 percent), Serbia (9.6percent) and Albania (9.2 percent).All SEE countries ended the year 2009 with a negative budget balance, which persisted alsoin the second half of 2010. IMF projections suggest that countries with the highest budgetdeficit in 2010 will be Montenegro (7.1 percent of GDP), Bosnia and Herzegovina andBulgaria (4.9 percent of GDP, respectively). In some countries like Serbia, Croatia andKosovo, the budget deficit to GDP ratio in 2010 is expected to be higher than in theprevious year, standing at 4.8 percent for Serbia, 4.7 percent for Croatia, and 3.4 percent ofGDP for Kosovo. Macedonia represents the country with the lowest expected budget deficitin the region (2.5 percent of GDP in 2010). In order to overcome potential problemsassociated with the budget deficits, in February 2010, Bosnia and Herzegovina, Serbia, andRomania entered into arrangements with the IMF to obtain financial support from thisinstitution.The economic downturn in 2009 had considerable impact on the unemployment growth inthe SEE countries..The increase of unemployment rate in these countries has continuedalso during the first half of 2010. The SEE countries continue to be characterized with highunemployment rate, with the highest rate prevailing in Kosovo (around 45 percent),followed by Bosnia and Herzegovina (about 43.1 percent) and Macedonia (about 32.1percent).Regarding the exchange rate between the currencies of the SEE countries and the euro, inJune 2010, the Albanian lek appreciated against the euro by 1.8 percent, reaching 136.0720 |