Relationship Between Economic Factors and Non-Performing Loans- the Case of Albania

Open access


The financial system in Albania is dominated by the banking system and therefore its performance is of great importance for the financial and economic stability of the country. The share of banking sector assets at the end of 2016 reached 95.8% of Gross Domestic Product (GDP). On the other hand, the banking system does not operate isolated and it is consequently linked to the country's economic cycle, at the same timed affected by economic developments. Credit risk is the biggest risk to which the banking system is exposed because the credit occupies the main weight in the banking system assets. In this paper there is a description of lending activity and credit risks in Albania. The analysis focuses on problem loans and analyzes their performance over the years. This paper analyzes the links between non-performing loans and some economic factors through the statistical program, using the simple and multi-linear regression method. As a function of our working regarding non-performing loans, they are presented as a dependent variable and as independent variables, some economic indicators are thought to have an impact on the level of non-performing loans such as GDP growth rate, unemployment, inflation and rate of interest on the loan.

[1] Ali Shingjergji (2013). The Impact of Macroeconomic Variables on the Non Performing Loans in the Albanian Banking System During 2015-2012. Academic Journal of Interdisciplinary Studies MCSER Publishing-Rome, Italy, Vol. 2, No 9, 335-339

[2] Alwyn Jordan, Carisma Tucker( 2013) Assessing the Impact of Nonperforming Loans on Economic Growth in The Bahamas, Monetaria, Volume 1,Number 2 (pp 372-400)

[3] Dimitrios P.Louzis, Angelos T. Vouldis, Vasilios L. Metaxas (2010). Macroeconomic and bank-specific determinants of non- performing loans in Greece: a comparative study of mortgage, business and consumer loan portfolios. Bank of Greece, Working Papers 118.

[4] Eliona Gremi (2013). Macroeconomic Factors That Affect the Quality of Lending in Albania. Research Journal of Finance and Accounting, Vol.4,No.9, 2013, 50-57.

[5] Iulia Andreea Bucur, Simona Elena Dragomirescu (2014). The influence of macroeconomic conditions on credit risk: case of Romanian banking system. Studies and Scientific Researches. Economics Edition, No 19, 84-95

[6] Jakubík, Petr; Reininger, Thomas (2014): What are the key determinants of nonperforming loans in CESEE?. IES Working Paper, No. 26/2014

[7] Jordan Kjosevski & Mihail Petkovski (2017). Non-performing loans in Baltic States: determinants and macroeconomic effects, Baltic Journal of Economics, 17:1, 25-44, DOI:10.1080/1406099X.2016.1246234

[8] Kimberly Beaton, Alla Myrvoda, and Shernnel Thompson (2016). Non-Performing Loans in the ECCU: Determinants and Macroeconomic Impact. IMF Working Paper

[9] Klejda Gabeshi (2016). The Impact of Macroeconomic and Bank Specific Factors on Albanian Non- Performing Loans. European Journal of Sustainable Development Research, 95-102

[10] Lorena Kurti, (2016). Determinants of Non-Performing Loans in Albania. The Macrotheme Review 5(1), 60-72

[11] M. Nkusu (2011). Nonperforming Loans and Macrofinancial Vulnerabilities in Advanced Economies, IMF Working Paper 11/161

[12] Maria Balgova, Michel Niesand, Alexander Plekhanov (2016). The economic impact of reducing non- performing loans. European Bank for Reconstruction and Development, Working Paper No.193.

[13] Martin Gächter, Piotr Macki, Isabella Moder, Éva Katalin Polgár, Li Savelin, Piotr Żuk (2017). Financial stability assessment of EU candidate and potential candidate countries Developments since 2014 . European Central Bank Occasional Paper Series , No 190

[14] Nir Klein (2013). Non-Performing Loans in CESEE: Determinants and Macroeconomic Performance. IMF Working Paper, No 13/72

[15] Raphael Espinoza and Ananthakrishnan Prasad (2010). Nonperforming Loans in the GCC Banking System and their Macroeconomic Effects. IMF Working Paper 10/224

[16] Ricardas Mileris (2012). Macroeconomic Determinants of Loan Portofolio Credit Risk in Banks. Engineering Economics, 2012, 23(5), 496-504.

[17] Roland Beck, Petr Jakubik and Anamaria Piloi (2013). Non-Performing loans. What matters in addition to the economic cycle? EuropeanCentral Bank(ECB), Working paper, No 1515

[18] Bank of Albania

[19] World Bank

Journal Information


All Time Past Year Past 30 Days
Abstract Views 0 0 0
Full Text Views 24 24 4
PDF Downloads 30 30 9