Set out in details in the previous month, these measures aim at further reducing liquidity premiums and intermediation costs in the financial markets, in order to boost lending and economic growth. Our projections for 2013 support the assessment for Albania's economic growth ranging close to past year's rates. Foreign demand will be the main driver of economic growth, while the fiscal policy is expected to contribute to growth on the same direction, but at lower intensity, in the period ahead. On the other hand, private consumption and investment remain weak and unstable. The continuation of below-potential economic growth will determine weak inflationary pressures in the upcoming months as well. In the absence of unexpected supply-side shocks, consumer prices will continue to rise at low rates. With a 90% probability, four-quarter-ahead annual inflation will range within the 0.6–3.6% band. The low annual inflation rates and forecast for their continuation over the monetary policyrelevant horizon call for maintaining the stimulating nature of the monetary policy over the next quarters. 2  BIS central bankers’ speeches  *** At the end of discussions, the Supervisory Council decided to keep the key interest rate unchanged, at 3.75%. It concluded that stimulating monetary conditions establish the proper premises for meeting the inflation target in the medium term, and contribute to the growth of aggregate demand and full utilisation of production capacities. The weak inflationary pressures determine the continuation of a stimulating monetary policy by the Bank of Albania.

Referring back to the performance of inflation, INSTAT data reveal that consumer prices rose on average 2.5% in the first quarter of 2013. Inflation continues to be determined by food prices; their contribution accounts for about 90% of headline inflation. Moreover, food inflation was offset by the lower inflation of non-food consumer goods. Inflation of this category reflected the downward oil price, following its decline in international markets. Also, the price fall of long-term consumer goods provided downward effects, whereas prices of other consumer goods did not change significantly. From the macroeconomic perspective, inflation continues to reflect the weak pressures from the aggregate demand-side and the absence of supply-side shocks. Below-potential growth of aggregate demand leads to underutilisation of production capacities and generates weak pressures on increasing wages, producer prices and profit margins. Under these circumstances, internal pressures on consumer prices appear weak, as reflected by the low core inflation. On the other hand, imported inflation was subdued due to the low inflation in Albania’s trading partners and the stable exchange rate. The most recent data on the real economy are as at 2012 Q4. According to these data, the Albanian economy grew 1.7% driven by expanded activity in the services, industry and agriculture sectors. The activity of the construction sector continued to shrink. Data on economic activity for the first quarter of this year remain limited. Based on indirect indicators, our analyses point to low economic growth, relying mainly on foreign demand, while the domestic demand components continue their sluggish performance.