Credit Activity in the Western Balkan Countries in Terms of Bank-Specific Indicators: A Comparative Analysis

ABSTRACT

This paper aims to explain some current considerations and approaches about the credit activity in Albania compared to the other countries in the Western Balkan's region in terms of bank-specific indicators. During 2020 and in the first half of 2021, the evolution of bank credit in the Western Balkan countries continued to be positive, influenced by monetary easing, support for credit risk reduction and other support policies offered by central banks. The balance sheet of banks in the region has improved over the period, and the non-performing loan rate has declined compared to a year ago in most countries. Among the various lending measures, the study of credit activity will be focused on bank credit (loans and advances) to the private sector, one of the most important indicators of bank development. Using a qualitative and quantitative analysis, the main objective of this paper is to generate and explain through a descriptive and graphical analysis, the evolution of the bank credit to the private sector for the six countries of the Western Balkans, Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia. Countries in the region have benefited from a substantial inflow of foreign funds and cross-border loans before the crisis. When the financial crisis broke out, credit growth declined dramatically and did not begin to recover, in part due to the banking sector's reversal in external financing. The COVID-19 pandemic also brought a sudden negative revision of expectations.