Looking ahead, according to the Bank of Albania, the main risks to economic stability pertain to economic growth. A number of signals from the real and financial sectors show that the contraction of consumers’ balance sheets and slowdown of investments, used so far by economic agents  2  BIS central bankers’ speeches  as buffers to the crisis, may imperil the mid-term prospect of economic growth. The propensity to save and defer investments may affect the competitive advantages and growth potential of our economy. Deleveraging, mostly driven by regulatory requirements that are not related to the performance of the economy, may undermine the existing financing channels, which have been so far an important component for growth. According to the Bank of Albania, the current situation requires higher attention and courage by all economic agents to make the right decisions for development and in response to the challenges arising from the external environment. In a more general setting, the Bank of Albania believes that implementation of right macroeconomic policies by harmonising the monetary and fiscal policies, is a prerequisite for the country’s sustainable and long-term development. They should have two main components: support growth and sustainable development for the country’s economy and boost long-term development through encouraging structural reforms. In Bank of Albania’s view, our economy is flexible and the infrastructure of core services, financial services and regulatory framework is constantly improving. The labour force is competitive, in terms of cost, and increasingly qualified.

Third, to increase our prudence towards the financial system stability, we adopted new techniques for a more comprehensive systemic risk assessment, enriched stress test exercises with the “bottom up” approach and improved models for the indirect credit risk assessment. The twinning project concentrated most of its resources on supervision and financial stability. In addition to constant motivation for improving the regulatory framework, supervision activities and risk administration, this priority becomes even more necessary given added challenges related to specific developments over the past years. The Bank of Albania has undertaken a number of actions to face and overcome these challenges. For the fourth consecutive year, the Albanian economy has been under the influence of the global economic and financial crisis. Its latest stage, the sovereign debt crisis and its interrelation with the balance sheets of the financial system have placed us on the frontline. Our two main trading and financial partner countries, Greece and Italy, have been severely hit by the crisis. Against this unfavourable landscape, the Albanian economy has grown and has maintained its financial soundness. Private agents have an overall sound financial position, relatively low debt levels and positive savings rates. In contrast to other countries in the region, the Albanian financial system has continued to lend to the economy, although at slower pace and somewhat tighter terms. Building on an appropriate and flexible regulatory framework, this response has been determinant to encourage the restructuring of the economy and guide it towards profitable sectors.