In order to restore an adequate flow of credit to the economy, banks should take advantage of governments’ commitments to support banks’ balance sheets through capital injections, the provision of government guarantees on new bank debt, as well as through asset relief schemes aiming at removing troubled assets from banks’ balance sheets. The common goals of these government measures in Europe and elsewhere are to safeguard financial stability, help restore the provision of credit to the economy and bolster confidence in the soundness of the financial system and in the prospects of the economy. Needless to say, the ongoing structural adjustment in the banking sector and the low confidence of investors in the soundness of some institutions cannot be counteracted by monetary policy and the provision of central bank liquidity. IV. Bank support measures and fiscal stimulus  At present, the European economy is experiencing a mutually reinforcing interaction between, on the one hand, the weakening of economic activity and rising unemployment, and, on the other hand, the deleveraging of banks’ balance sheets and the persisting bank stresses in some bank funding markets. The deleveraging process and the emergence of an adverse feedback loop between the real economy and the financial sector will affect the favourable impact of monetary policy and liquidity provision on the economy. These developments underscore the importance of effective implementation of the government measures to strengthen bank balance sheets and improve banks’ medium-term market funding.

Our projections have not changed: the Bank of Albania expects economic activity to improve progressively over the medium-term horizon. This performance will continue to be sustained by stimulating financial conditions and growth of private domestic demand. It will contribute to the improvement of economic and financial equilibriums in Albania and to the return of inflation to target within 2018. BIS central bankers’ speeches  1  The realisation of these objectives requires maintaining the actual mix of economic policies. The monetary policy will maintain the stimulating trend over the medium-term horizon, while the intensity of the monetary stimulus will not decrease for some quarters ahead. On the other hand, the fiscal policy should maintain its consolidating trend. The balance of risks related to expected developments remains on the down side. The expansion of economic activity continues to be decelerated by the unfavourable economic performance in the euro area, which is further complicated by the Brexit, as well as by the behaviour of economic and financial agents, who continue to show reluctance in undertaking long-term business projects. Against this backdrop, the Bank of Albania deems that economic policies and structural reforms should focus on: –  Maintaining and further strengthening the economic and financial stability. –  Accelerating structural reforms, especially with regard to: improving the legal setting and business climate; encouraging domestic and foreign investments, completing the infrastructure; enhancing productivity; and, improving the labour market. –  Expanding crediting, to support the country's medium-term development.