In general, our efforts resulted effective in managing the liquidity problems, however tighter funding conditions faced the Albanian economy in both public and private sectors. This tendency reflects, to a great extent, the risk aversion in financial agents and markets. Addressing it will be our main challenge over the next year. Back to economic development. Official data show that the economic growth for 2012 remained positive but slower than in the previous year. According to INSTAT data, gross domestic product grew by 1.6% in 2012, supported by boosted activity in services and agriculture sectors. Meanwhile, the industrial sector remained stagnant, while the construction sector shrank, reflecting the weak domestic demand and specific sector-related problems. Though to a lesser extent, the economic growth was supported mainly by external demand and increased exports. On the other hand, despite the stimulating monetary policy, the domestic demand appeared weak. This weakness reflects the reluctance of consumer and businesses to consume and invest, and the limited space for increasing public spending. In general, the Bank of Albania deems that these determinants of economic growth will continue to be present even over the next quarters. The low degree of existing capacity utilization affected the labour market. The pace of increase in employment slowed down, though the unemployment rate has remained 13.3% over more than one year. Rising exports and slowing imports brought about 13.8% decline in current account deficit.

Aiming to enhance transparency and boost competition among banks in the market, on July 2012, the Bank of Albania started publishing on its website the interest rates and banks’ commissions on their products. However, we are well aware that there is still room for improvement in reference interest rate used in credit contracts and in the information that banks publish on their websites. Addressing the prevention of money laundering and of terrorism financing was an important part of the regulatory and supervisory process in 2012. Besides improving the regulatory framework in line with the new Law and EU standards, we have also strengthened our cooperation with the Department of Money Laundering Prevention and have fostered the supervisory process of financial institutions. On-site and off-site examinations revealed that entities have taken appropriate, preventive measures and have established a proper infrastructure to identify and report suspicious cases. The year 2012 highlighted important developments in the area of financial activity licensing. Hence, two branches of foreign banks turned into their subsidiaries, reducing the risk of their exposure to parent-bank risks, enhancing their independence and the control level exercised over them by the Bank of Albania. An important change was also the transfer of 100% shares of the Emporiki Bank from Emporiki Bank of Greece to IUB Holding France, contributing to long-term and stable development of the banking industry. Finally, in 2012, the number of non-bank financial institutions and the range of financial products and services provided in the market by the financial system increased.