Measures for addressing financial markets concerns have led to economic activity slowdown of our trade partners and are reflected in progressive deceleration of our exports growth rates. Moreover, higher food, fuels and primary commodity prices are translated into stronger foreign inflationary pressures, expansion of trade deficit and, potentially, weaker domestic demand as a result of negative effects on Albanian households’ financial balances. Additionally, negative developments in the global arena are reflected in added uncertainties in the Albanian economy and negative impact on domestic consumption and investments. In spite of these shocks, the Albanian economy continued to grow in 2011, albeit at lower rates. This growth has reflected structural improvements of the Albanian economy, overall sound balances of economic agents, as well as utilisation of available capacities for macroeconomic stimulus and success to maintain macroeconomic balances. Average annual inflation in the second half of 2011 was 2.9%, down by 1.1 percentage points compared with the first half of 2011. Downward inflation emerged in the second quarter and was then reinforced during the second half of the year. This resulted from reduced contribution of processed food, unprocessed food, and administered prices. In particular, food prices deviated from their seasonal behaviour in December, producing rapid curbing of annual inflation to 1.7%. From the macroeconomic perspective, the downward inflation was influenced by both demand and supply factors, at the same time. On the supply side, slowdown of primary commodities price inflation in global markets and relative stability of the exchange rate were materialised in lower imported inflation.

Ardian Fullani: Recent economic and monetary developments in Albania Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the press conference on the Monetary Policy Decision of the Bank of Albania Supervisory Council, Tirana, 25 January 2012. *  *  *  Today, on 25 January 2012, the Supervisory Council of the Bank of Albania reviewed and approved the quarterly Monetary Policy Report. Based on the analysis of Albania’s latest economic and monetary developments and following discussions on their performance outlook, the Supervisory Council of the Bank of Albania decided to cut the key interest rate by 0.25 percentage points. Following this decision, the rate for One Week Repurchase Agreement fell to 4.50%. The key rate is reduced under the conditions of contained inflationary pressures over the monetary policy horizon as well as expectations for a more prudent fiscal policy in the period ahead. The Supervisory Council deemed that this decision provides the appropriate monetary conditions to meet the inflation target over the medium run. Moreover, this movement increases the monetary stimulus and encourages the economic activity in Albania. (Let me now proceed with an overview of economic developments and main issues discussed at today’s meeting.) *** The Albanian economy faced challenges in 2011 as regards economic growth and maintaining of macroeconomic balances. Additional attention to public finance stability in euro-area countries is reflected in added risk premiums in international financial markets and reduced willingness to invest in emerging economies.