Key Macroeconomic Drivers on Reducing Non Performing Loans in Albania

Open access


The financial system in Albania is really fragile, mainly focused in banking system. This banking system faced a sharp rise in non-performing loans after 2009. The level of NPL-s has increased from 10.48% on 2009 to the pick of 23.49% on 2013. Then, it started the decline arriving to 13.23% on 2017. The focus of this study it is the determination of the main macroeconomic factors affecting the level of bad loans. We tested statistically the role of GDP growth, inflation, unemployment level, Money Aggregate M2, Exchange rate and interest rates for loans, in the level of NPL-s. The data were taken from World Bank and Bank of Albania database. The data were elaborated through statistical program E-views 10. We conducted a multiple regression and the macroeconomic factors explaining NPL-s resulted: the GDP growth, the monetary aggregate M2 and the interest of loan. This connection resulted negatively correlated with GDP growth which began to grow after 2013 arriving at 3.84% on 2017, and positively correlated with M2 which has experienced a slight increase in these years; and interest of loans which is still low in Albania, decreasing from 2001 and on. These macroeconomic factors should be taken in consideration by Albanian authorities when compiling their plans and strategies.

If the inline PDF is not rendering correctly, you can download the PDF file here.

  • Abid L. Ouertani M. and Zouari-Ghorbel S. 2014. Macroeconomic and Bank-Specific Determinants of Household’s Non-Performing Loans in Tunisia: a Dynamic Panel Data. Elsevier-Procedia Economics and Finance 13 p. 58 – 68.

  • Bogdan F. 2017. Lessons from the impact of internal and macroeconomic determinants of bad loans in CEE banks. Online at EURINT 2017 vol. 4 p. 198-212

  • Donath L. Cerna V. and Oprea I. 2014. Macroeconomic determinants of bad loans on Baltic countries and Romania. SEA-Practical Application of Science Volume II Issue 4 (6) p.71-77.

  • Khemraj T. and Pasha S. 2009. The determinants of non-performing loans: an econometric case study of Guyana. Online at MPRA Paper No. 53128.

  • Klein N. 2013. Non-performing loans in CESEE: determinants and impact on macroeconomic performance. IMF Working Papers WP/13/72.

  • Louzis L. Vouldisac A. and Metaxasa V. 2012. Macroeconomic and bank-specific determinants of non-performing loans in Greece: A comparative study of mortgage business and consumer loan portfolios. Elsevier Journal of Banking & Finance. Volume 36 Issue 4 P. 1012-1027

  • Makri V. Tsagkanos A. and Bellas A. 2014. Determinants of non-performing loans: the case of Eurozone. Panoeconomicus 61(2) P. 193–206.

  • Mazreku I. Morina F. Misiri V. Spiteri J. and Grima S. 2018. Determinants of the Level of Non-Performing Loans in Commercial Banks of Transition Countries. European Research Studies Journal Volume XXI Issue 3 P.3-13.

  • Messai A. S. and Jouini F. 2013. Micro and macro determinants of nonperforming loans. International Journal of Economics and Financial Issues 3(4) P. 852–860.

  • Petkovski M. Kjosevski J. and Jovanovski K. 2018. Empirical Panel Analysis of Non-Performing Loans in the Czech Republic. What are their Determinants and How Strong is Their Impact on the Real Economy. Finance a úvěr-Czech Journal of Economics and Finance 68 (5) P. 460-480.

  • Podpiera J. and Weill L. 2008. Bad luck or bad management? Emerging banking market experience. Elsevier Journal of Financial Stability. Volume 4 Issue 2. P. 135-148

  • Staehr K. and Uusküla L. 2017. Forecasting models for non-performing loans in the EU countries. The Working Paper is available on the Eesti Pank web site

  • Škarica B. 2014. Determinants of non-performing loans in Central and Eastern European countries. Financial Theory and Practice. 38(1). P. 37-59.

  • Tanasković S. and Jandrić M. 2015. Macroeconomic and Institutional Determinants of Non-performing Loans. Journal of Central Banking Theory and Practice. 1. P. 47-62.

Journal information
All Time Past Year Past 30 Days
Abstract Views 0 0 0
Full Text Views 47 47 22
PDF Downloads 36 36 16