The Effect of Changes in Economic Growth on Non-Performing Loans (NPLs) Problem in the Greek Banking System

The Greek economy was affected very badly by the global economic and financial crisis of 2007-2008. The main reason of this catastrophic event is that the country’s speedy economic and financial growth in the pre-crisis period heavily based on the foreign funds, and the flow of these funds stopped immediately -even turned to opposite direction- with the spread of the crisis to Europe. This negative happening as well as the rearrangement of the public debts and remarkable reduction in the bank deposits led to a big financial crisis, and thus economic recession. Meanwhile, the loan quality in the banking system worsened extremely -almost half of the credits turned to bad loan- due to the macroeconomic deterioration as well as the banks’ very tolerated lending policies before the crisis, the borrowers’ imperfect attitudes, and improper governance. The improvement in NPLs ratio, which started simultaneously with the modest economic recovery in 2017, decreased it to 30.2 percent in 2020 from its peak level of 48.5 percent in 2016. However, a big part of it has been achieved thanks to write-offs and loan-sales.In this study, it was aimed to measure the effect of the changes in economic growth on these drastic changes in NPLs ratio. Although the changes in the gross domestic product (GDP) and NPLs ratio have always been in consistency with the economic theory, except the pandemic year of 2020, the often big differences between their changing rates imply that some other factors have also played significant role on NPLs movements. The findings of some studies for Greece indicate to remarkable impact of both economic growth and the other factors on bad loans issue. The results of our regression analysis also show that the relation between economic growth and NPLs is not so strong.In spite of the noticeable improvement, NPLs ratio is still at a very high level and requires constant remarkable declines in order to come down to the generally accepted levels. To perform this and have economic and financial recovery at the same time, the recovery should not be achieved only by write-offs and portfolio sales, but by collections from borrowers, and executions. The banks and the government should make the necessary changes in their policies and applications so as to decrease NPLs ratio through new lending, compromise with proper borrowers, and court executions. Keywords: Greece, global crisis, sovereign debt crisis, economic growth, non-performing loans. DOI: 10.7176/RJFA/12-12-05 Publication date:June 30th 202

SHORT TERM ALBANIAN GDP FORECAST: “ONE QUARTER TO ONE YEAR AHEAD”

In forecasting, macroeconomic variables such as GDP play an important role for policy makers and for the assessment of the future state of the economy. In this paper, different models to forecast quarterly GDP growth in Albania will be presented. The first group of models bases on ARIMA structures. These models are applied directly once on GDP series and then to the main economic activities which are been used to derive GDP. The second group of models for forecast uses VAR model, and the last group are refereed on by the bridge models. In cases were bridge models are used, variables with different frequencies are forecasted for the missing period. After that, all the series are aggregated at quarterly frequencies and are used for GDP forecast. Hence, the bulk of the material is to give comparisons of those models to forecast Albanian quarterly economic growth from one quarter up to four quarters ahead in a pseudo-real time setup

A Critical Assessment of Fiscal Policy and Impact on Economic Growth. Albanian and Transition Economies Case

The main focus of this paper is making a critical assessment of possible links that exists between public finance policies and growth during transition period in Albania. Based on panel data technique is tested the impact of government size and the effect of budget deficit in economic growth.On revenue side of public finance are done important reform, such as the introduction of VAT and flat taxes for both personal income tax and corporate income tax. A common trend in the last years has been substantial deduction of corporate income tax. Based on taxation theory are also analyzed, the main determinants of tax performance in selected transition economies.The main findings of this work are that both government size and fiscal deficit are important factors that influence growth performance. The study has found support for negative impact on growth of government size in transition economies.In tax performance evaluation for transition economies, GDP per capita, share of agriculture and share of industry have the expected impact in accordance with tax literature and previous studies. Total government expenditure has a positive impact in tax collection. Shadow economy is important for tax performance; therefore in order for the government to increase tax revenue, the tax evasion should be reduced