These foreign inflows were sufficient to cover the current account deficit and provided the premises for a stable exchange rate. During 2013, the gross foreign currency reserve hiked by about EUR 42.5 million, settling at EUR 2,015 million, sufficient to cover 4.6 months of imports and  BIS central bankers’ speeches  1  170% of the short-term foreign debt. In spite of improvements, the balance of the external sector remains fragile. I would like to reiterate our appeal for taking the measures to boost the competitiveness of Albanian products and create a favourable climate to attract foreign investments. During 2013, the Government pursued an expansionary fiscal policy, providing a positive impulse to economic activity. In annual terms, budget expenditure increased 4.7%, whereas revenues fell 0.5%, from a year earlier. Government’s fiscal behaviour increased the budget deficit to ALL 65.4 billion, standing 42.7% higher than a year earlier. Last year’s fiscal expansion increased the public debt and public finance’s fragility, adding thus concerns over fiscal sustainability in the medium and long run. Considering the public debt as one of the biggest structural weaknesses of the Albanian economy, we have called for measures to be taken for ensuring the long-term soundness of public finances, and eventually welcomed such measures. In this context, we think that there is still much to be done, especially with regard to adopting a transparent and efficient fiscal rule. Financial markets were characterised by good liquidity conditions and low inflation risk premia.

According to preliminary data from INSTAT, the Albanian economy grew 0.44% in 2013, from 1.2% in 2012. The economic activity dynamics reflected the contraction in the services sector, especially tourism, whereas the production sector contributed positively, driven by investments in infrastructure, further growth of exports and rise in agricultural produce. Aggregate demand was weak, reflecting the weak private sector demand for consumption and investments. This component continued to be negatively affected by the low economic agents’ confidence, slower income and relatively tight financing conditions. The general elections held last year elevated the uncertainties in economic agents and financial markets, hence decelerating their consumption and investments in the post-election period. Foreign demand and public expenditure contributed positively to economic growth, but they did not manage to fully offset the sluggish private demand. The external sector was characterised by relative stability of the current account deficit and increase in the country’s foreign currency reserve. Exports of goods surged 13.5%, reflecting the improved economic situation in Albania’s neighbouring countries and the structural improvements in certain sectors of the economy. Furthermore, imports of goods were 1.8% lower from a year earlier, as a result of the weak domestic demand. These developments materialised in the correction of the trade deficit by 13.5% in annual terms. Moreover, the balance of services deteriorated significantly, due to the fall of net exports in tourism. Main foreign currency inflows during 2013 were in the form of net foreign investments.