Albania’s Savings Tell Two Stories at Once

By Dorina Muka (Tirana)

The February deposit data from the Bank of Albania are being read, in some quarters, as a warning sign. Lek savings fell by 4.3 billion lek on the month. The headline number is technically accurate and analytically thin.

What actually happened in February is straightforward once January is understood. State budget payments to public works contractors flooded business accounts at the turn of the year, producing a single-month lek deposit surge of 26 billion lek that had no organic basis. It was a timing artifact, not a structural acceleration. February’s 4.3 billion lek contraction is the same money leaving through the other end of the pipe as those companies paid suppliers, workers, and tax obligations. The correction was not only predictable; it was the correct functioning of the system.

Strip the January distortion out, and the underlying savings picture is one of consistent expansion. Lek deposits stand 85.5 billion lek higher than they did in February 2025, a 13.2 percent annual increase built steadily across the full twelve-month period. Euro deposits added 25 million euro in February after declining in January, and are up 643 million euro, or 7.95 percent, year-on-year. Total deposits in the banking system grew by approximately 1.5 billion euro over the past year, with lek-denominated savings accounting for roughly 58 percent of that increment. The shift toward the domestic currency is gradual and real.

The more consequential signal in the February data is not in deposits at all. It is in the credit figures.

New lending returned to growth in February, with banks extending 30.3 billion lek in fresh credit, up 5.7 percent on the same month a year earlier. That recovery matters because January had been weak, leaving the two-month cumulative position 3.3 percent below the prior-year pace. The opening of 2026 has not been strong for credit. But the composition of that weakness is what the data actually say.

The drag is concentrated in two specific segments. Lending to individuals is running 9 percent below last year’s level, after households drove successive monthly records throughout 2025. The Bank of Albania introduced macroprudential measures in mid-2025 to tighten mortgage underwriting standards; they produced no visible effect in the second half of last year. The early 2026 figures suggest the measures are now doing what they were designed to do. That is not a credit problem. It is a credit policy working on a lag.

Lending to public enterprises collapsed to just 300 million lek across January and February combined, roughly one-tenth of the prior-year figure. That number should not be over-interpreted. The segment is structurally erratic, driven by sporadic large transactions from individual state-owned entities, primarily in energy. The absence of such a transaction in the opening two months is not a tightening story.

Private sector companies tell the opposite story. New credit to non-financial private enterprises reached 40 billion lek in January and February, up 7.3 percent year-on-year. That is the segment that reflects genuine investment decisions and business confidence. It is growing without the volatility that distorts the rest.

The outstanding loan portfolio closed February at 946.9 billion lek, recovering 7.5 billion lek from January and sustaining annual growth of 11.6 percent. Household credit continues to expand at 17.7 percent year-on-year; private enterprise credit at 8.7 percent. Both figures remain well above nominal GDP growth, meaning the banking sector is deepening its role in the economy rather than merely keeping pace with it.

The risks are real but they sit in the forecast rather than the current figures. A return of inflation would force rate increases, raise debt-service costs, and test borrower capacity in a portfolio that today stands at historic quality lows. Albanian banks carry that risk from a position of strength: capital buffers are solid, and a loan-to-deposit ratio below 70 percent gives the system room that most regional peers do not have. The question is whether that room is used to accelerate the network and regulatory investments the sector still needs, or held in reserve against a deterioration that has not yet arrived.

The February data, read whole, describe a banking sector absorbing a seasonal distortion and returning to trend. The warning signs belong to the scenario, not the balance sheet.

Dorina Muka is an energy and economy professional with experience in Albania’s infrastructure and regulatory environment.