Financial markets continue to highlight downward liquidity premiums and inflation. The interbank interest rates have further declined, remaining close to the key interest rate and displaying low volatility. A more moderate government demand for funding and the shortterm interest rate cut in the money market have been reflected in an overall decline in the yields on primary market government securities. Our assessments on economic outlook suggest a moderate economic growth for the remainder of the year and for the next year. Boosted uncertainties surrounding the global economy make their impact on current and expected developments of the Albanian economy. In particular, the situation of our trading partners is expected to be reflected in a sluggish foreign demand for Albanian goods and services. Also, the need for maintaining budget deficit and public debt parameters is expected to materialize in the public sector’s lower contribution to aggregate demand over the period ahead. Under these conditions, the performance of economic activity at home will be determined substantially by the extent and speed of recovery of the private sector demand – consumption and private investments. Despite the positive growth, aggregate demand is expected to remain below the potential of the Albanian economy, determining the incomplete capacity utilization in the economy and generating demand-driven low inflationary pressures. Considering the materialization of these expectations and projections for further weakening of inflationary pressures from global conjuncture, annual inflation is expected to be within the Bank of Albania’s target in the medium run.

The Bank of Albania is very heedful to external balances of the Albanian economy, regarding their correction as one of the main priorities of the country’s macroeconomic policies. This objective assumes more importance against the backdrop of recent developments in global financial markets. In the long run, its attainment requires ongoing structural reforms, which will enhance competitiveness of the Albanian economy and will generate higher revenues from the export of goods and services. Monetary inflationary pressures remain subdued in the medium run. Monetary expansion has maintained stable annual growth rates during the year, resulting 10.4% in September. Public sector demand for funding has been downward in recent months, making the private sector’s demand provide the largest contribution to money supply growth. Private sector credit grew 14.0% in September, marking a slight acceleration compared with the first half of the year. However, as we have constantly stated, the relatively sluggish performance of private sector credit reflects mostly its weak demand. The banking sector appears liquid and well capitalized to credit the Albanian economy, but it has increased its prudence in terms of lending, thus reflecting the new reality of the Albanian economy and global financial markets. The Bank of Albania assesses that, within the parameters of prudence, there is room for a more rapid growth of credit and for supporting sound investment projects by the banking sector. On our behalf, we will continue to support the financial system with liquidity and monetary stimuli in order to boost lending.