The cyclical weakness of aggregate demand restricts Albania’s economic growth in the short and medium term, whereas the solution of structural problems will determine its long-term development. Overcoming these challenges requires joint, brave, coordinated and forward-looking action. The Bank of Albania deems that this action should be based on four pillars: (i) safeguarding macrofinancial stability in the country and pursuing stimulating economic policies; (ii) reducing uncertainty in economy; (iii) ongoing structural reform and (iv) convergence with the European Union. 1. First pillar: Macroeconomic stability and economic stimulus  As already known, Albania’s economic development is in a fragile stage. Against the backdrop of the global crisis, the economic growth rates have decelerated, posing difficulties to the public and private sectors, to businesses, households and the financial system. In plain terms, the aggregate demand is weak and does not manage to fully utilise the country’s productive capacity. Consumer spending is low, primarily due to households’ uncertainties about the future, but also due to their slowing income. The two other aggregate demand components also show limited ability in providing stable economic growth impulses: public spending is limited, due to lack of fiscal room because of a higher public debt, while Albania’s exports suffer the sluggish demand from the international markets and the low degree of diversification. Finally, business investments are downward, reflecting businesses’ restricted room for boosting their sales and banks’ tighter lending standards. BIS central bankers’ speeches  1  The economy is a complex and interdependent mechanism.

Second, without violating the culture of observing the contractual obligations, it should be more active in the loan restructuring process to provide more room to businesses deserving it. Third, we think that Albania has in place business and development projects of a long-term interest that deserve greater attention. Lack of the loan demand is an already-known and well-understood problem. However, the banking system should be more flexible when assessing the submitted applications. In all my public pronouncements, I have iterated the prudence needed for sound public finances in the country. We deem that the country’s sustainable development economic paradigm requires taking swift measures for making the public finances healthier. Beyond the short-term challenges about the current year’s budget, putting in place a  2  BIS central bankers’ speeches  reliable and transparent fiscal rule is a necessity to discipline the fiscal policy in the long term and guarantee the trust of the financial markets in the Albanian public debt. Finally, the Bank of Albania deems that the macroeconomic stimulus should continue to be based on a stimulating monetary policy and a banking system more focused on the needs of the economy. Also, we believe that the fiscal policy lacks the room for such actions. This action path preserves the macroeconomic stimulus and the soundness of macroeconomic balances, hence providing the shape to the first pillar of development policies. 2. Second pillar: Reducing uncertainty in economy  The second pillar (of a short-term action, as well) relates to reducing uncertainty in the economy.