Prices in the global markets and the exchange rate were relatively stable; hence, they did not exercise pressures for upward prices at home. Likewise, expected inflation remains anchored around Bank of Albania’s 3% target. Finally, monetary developments are characterised by low demand for liquid monetary assets. The monetary policy pursued by the Bank of Albania has contributed to stimulating the aggregate demand, administrating the liquidity in the system, and keeping inflationary expectations in check. This situation of inflationary pressures is expected to remain steady in the medium run. Available figures on the economic activity over the second half of the year are partial. Indirect data analysis, however, confirm earlier estimates for positive growth during this period, at levels similar to the second quarter of the year. Economic growth was mainly driven by foreign demand, while domestic demand was weak. Consumer spending is assessed to have been up during the third quarter, reflecting also better activity of the services sector. Private consumption, however, remains weak, due to the slow economic performance and the perceived uncertainties about the future. Its prospect in the medium run remains unclear. Private investments remain at low levels, in the presence of partial utilisation of production capacities, uncertainties about foreign and domestic demand, and tightened lending terms by the financial sector. Public sector demand was also low during the third quarter and did not, therefore, contribute to higher aggregate demand. As at end-October, the budget deficit for this year was about 19.0% lower than a year earlier.

Ardian Fullani: Overview of economic developments and key issues in Albania Speech by Mr Ardian Fullani, Governor of the Bank of Albania, on the monetary policy decision by the Supervisory Council of the Bank of Albania, Tirana, 20 December 2012. *  *  *  Today, on 20 December 2012, the Bank of Albania’s Supervisory Council reviewed and approved the monthly Monetary Policy Report. Based on the latest monetary and economic developments in Albania, and following the discussions on their future outlook, the Bank of Albania’s Supervisory Council decided to keep the key interest rate unchanged, at 4.00%. The Supervisory Council deems that the current monetary conditions are adequate to meet Bank of Albania’s inflation target in the medium term. Moreover, these conditions ensure the right monetary stimulus to support the domestic demand. Let me now proceed with an overview of the economic developments and key issues discussed at today’s meeting. *** Annual inflation in November stood at 2.5%. The major part of inflation continues to be determined by the performance of food prices. Contribution of other goods was steady from the previous month. Inflation fluctuation owed mainly to the supply-side factors, of external and internal origin. Nonetheless, the intensity of supply shocks was low and lasted for a short period of time. The Supervisory Council finds that developments in the real economy and financial markets produced low inflationary pressures. The Albanian economy continues to remain below its potential. This development is reflected in the low increase of wages and production costs.