Ardian Fullani: Overview of Albania’s latest economic and financial developments Speech by Mr Ardian Fullani, Governor of the Bank of Albania, on the Monetary Policy Decision-Making of the Bank of Albania’s Supervisory Council, Tirana, 30 April 2013. *  *  *  Today, on 30 April 2013, the Supervisory Council of the Bank of Albania reviewed and approved the quarterly Monetary Policy Report. Based on the most recent monetary and economic developments in Albania, and following the discussions on their outlook, the Supervisory Council of the Bank of Albania decided to keep the key interest rate unchanged, at 3.75%. The Supervisory Council deems that the current monetary conditions are adequate to meet Bank of Albania's inflation target in the medium term. The present interest rates and liquidity situation in the economy provide simultaneously the necessary monetary stimulus to boost domestic demand. Let me now proceed with an overview of the economic developments and key issues discussed at today’s meeting. *** According to INSTAT data, economic activity in Albania increased 1.6% in 2012. The Albanian economy showed signs of weakness during the past year, reflecting an overall uncertainty in the internal and external environment. Nonetheless, against the backdrop of unfavourable developments, the main indicators of domestic and external balances remained within healthy parameters. During this period, inflation ranged within the Bank of Albania target band and indicators of banking system soundness improved. Maintaining these balances provides the right macroeconomic premises for sustainable and long-term growth.

Private consumption and investment remain weak in the presence of uncertainties for the future, decelerating disposable income, tighter lending terms and spare production capacities. BIS central bankers’ speeches  1  The performance of budget indicators in the first quarter of the year shows increased fiscal stimulus. Budget deficit increased 41.5% during this quarter, reflecting the 3.6% decline of fiscal revenues and 1.4% increase in public expenditure. The Bank of Albania once again draws the attention on maintaining the fiscal equilibriums and keeping the budget deficit and public debt at affordable and harmless levels for the Albanian economy. In our opinion, the medium-term priority for the fiscal policy should be maintaining budget discipline. In the long term, the Albanian public debt should be reduced and anchored in a reliable, effective and transparent fiscal rule. Developments in the external sector of the economy reveal continued positive contribution of net exports to aggregate demand growth. Data on foreign trade for January and February show that trade deficit narrowed 27.1% annually, reflecting at the same time the further surge in exports and the weak performance of imports. During this period, imports shrank 9.5% in annual terms, while exports maintained their high annual growth rates, at 18.6%. Monetary developments were in line with the performance of the real economy during the first quarter. In January and February, credit to the economy was weak across all its segments. As at end-February, the loan portfolio of the banking sector stood only 1.7% higher than a year earlier.