Import coverage by exports ratio averaged 44.5%, or up 9 percentage points from the same quarter of the previous year. During the period under analysis, exports in value continued their upward 2  BIS central bankers’ speeches  trend having started since 2010 Q1 and expanded by 45.4% y-o-y. However, following a speeded-up growth over the first two months of the year, our export growth rates were significantly mitigated in March. During the same period, imports grew by 15.9% y-o-y. The division of imports according to their final use highlights the rapid growth of imports of intermediate and capital goods. The outlook of these trends may be associated with expanded current account and trade deficits in the country. The Bank of Albania is very attentive to this development, since it significantly conditions the external balances of Albanian economy and the foreign exchange market. Monetary expansion during 2011 Q1 was in line with economic agents’ money demand, marking a steady year-over-year growth of roughly 11%. The 6.2% y-o-y growth of real money supply remained close to historical lows. Moderate growth rates of M3 aggregate and other monetary indicators are in line with so-far assessments of existence of contained monetary inflation pressures. This trend is also supported by developments of currency outside banks. This indicator continued to fall y-o-y, and together with the shift of deposit structure to longer maturity terms, it indicates economic agents’ lower preference for liquidity.

The Bank of Albania judges that in the period ahead, inflationary pressures along the time horizon of monetary policy stance will remain relatively high, but their intensity will decrease during the year. In the following, I will analyse in detail the factors determining inflation developments and related risks. During the first months of 2011, global economic activity continued to grow, although the signals coming from confidence indicators suggest that risks associated with these positive developments are in place. Global inflationary pressures have increased as a consequence of a higher demand and persistent supply-side shocks. In advanced economies, fiscal consolidation and public debt reduction remain the major concerns, whereas inflation pickup has decreased the space for monetary stimulus. In advanced economies, the positive global demand momentum has led to increased aggregate demand, while the upward inflationary pressures have made the central banks respond by tightening the monetary policy. In financial markets, the public balance health has determined the yield performance in several countries, while the political tensions have elevated the demand for safer instruments. The outlook remains highly uncertain, as a consequence of higher global prices, fiscal consolidation in some euro-area countries and less space for fiscal and monetary stimulus. Returning to Albanian economy, the latest data on 2011 Q1, obtained from business confidence surveys, the performance of external trade activity, and monetary and fiscal indicators, support the continued recovery of the domestic economic activity, primarily due to positive contribution of production sector. External demand and fiscal stimulus are factors of major influence on this growth.