Along with the reduced fiscal stimulus in 2012, they resulted in a weak aggregate demand and low economic growth during the first three quarters of the year. Despite the negative impact on economic growth rate, the financial and macroeconomic stability resulted stable. In spite of demand volatility and supply concerns, inflation resulted low and in check, reflecting, inter alia, good anchoring of public expectations around the 3% target. Fiscal balance sustainability, Albania’s improved external position, and sound real-sector and financial-sector balances in the economy further strengthened Albania’s economic and financial stability over this period. Average annual consumer price inflation resulted 2.7% in the third quarter of the year, increasing gradually along the year. Added contribution of prices for unprocessed food and non-food consumer goods mostly created this quarter’s annual inflation rate. On the other hand, prices of other basket items were stable and slightly volatile. The economic and monetary analyses confirm the presence of weak demand-induced inflationary pressures. Developments in the real sector of the economy conditioned the controlled price rise of domestic products. These tendencies have been reflected in the downward trend of core inflation and low non-traded inflation of the consumer price index basket. Consumer price performance continued to reflect the low pressures from other cost elements. In particular, import prices were low and given the relative exchange-rate stability, they transmitted low pressures from imported inflation. Following the economic contraction in the first quarter, Albanian economy fell by 2.0% y-o-y, in the second quarter.

The higher the participation of non-residents in the bond market, the more vulnerable the market is to volatile portfolio outflows. So it is said that with history, if we learn it well, will not repeat itself. Nevertheless, sometimes lessons in history are cloaked in apparent success. The 2008 Global Financial Crisis and corresponding policy responses by major central banks caused risks not seen before. In the periods after, unconventional monetary policy and a prolonged period of low interest rates had negative spillovers to emerging markets. This was notably evident through the waves of volatile capital flows in large magnitude. These flows were drawn by the search for yields, and ironically coincided with a significant expansion and development of our financial markets, a key reform measure following the AFC. The region was once again at the mercy of global easy money, flattered with an overvaluation of asset prices and domestic financial market exuberance. As these capital inflows mainly originated from the advanced economies, regional financial markets became increasingly exposed to their vagaries. Take the Taper Tantrum for example, which exemplifies how fragile the region’s fate is when just a hint of the US Fed possibly tapering its asset purchases was sufficient to trigger massive 2/5  BIS central bankers' speeches  capital outflows from the region. Time and again, a clear policy lesson has come to the fore – the importance of diversification and the need to reduce reliance on the de facto reserve currencies to manage negative spillover effects.