Ardian Fullani: A summary analysis of domestic economic developments and the banking sector situation Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the regional meeting, Shkodra, 20 January 2011. *  *  *  Ladies and Gentlemen, The Bank of Albania considers its communication with the public a key element to an effective communication of its decision-making. To serve this purpose, it makes use of all forms and types of communication. However, direct contact with the people provides us with a real perception and interpretation of their position and expectations and supports a more effective decision-making process. Therefore, I am pleased to be again in your city, the centre of a region of well-known intellectual, cultural and patriotic heritage, which also gives a significant contribution to the country’s gross economic product. I would like, to start this direct communication with you with a summary analysis of domestic economic developments and, after that, dwell in more details on a number of concrete issues that affect the strength of relations between families and businesses on one side, and the financial system and banking sector on the other. During 2010, the Albanian economy is expected to have recorded a satisfactory growth. For the third quarter, annual economic growth is estimated at 4.9 per cent. The economic growth rate has been stable for the last two years, thus proving a good level of resistance to the effects of the international economic crisis. Other macroeconomic indicators have ranged within acceptable and expected levels.

It is worth mentioning that this macroeconomic stability is a reflection of the successful combination of key economic policies, that is to say, monetary and fiscal policies, during last year. More specifically, the fiscal policy aimed and succeeded to realise the necessary consolidation process following a fiscal expansion that accompanied economic developments in 2009. Fiscal consolidation was accomplished through better control over public expenditures and collection of revenues close to foreseen levels. The exchange rate for the national currency, regardless of its underpricing in 2009, less so in 2010, has been much more stable than currencies of other countries in South Eastern Europe, which apply a free flexible exchange rate policy. A gradual under-pricing of the Albanian Lek is deemed to have had a positive affect on the reduction of trade and current account deficits through establishing a more favourable dynamic for our economy’s exports and imports. Eventually, it is fully proven that the adoption of a flexible exchange rate regime has been one of the most outstanding choices of economic and financial policies over the past two decades. Annual increase of consumption prices has been almost all the time within the parameters established by the Bank of Albania, namely 2–4 per cent. Under moderate inflationary pressures, the Bank of Albania has followed a facilitating monetary policy, injecting liquidity into the inter-bank market and lowering the key interest rate to the level of 5 per cent. For 2011, macroeconomic indicators are expected to follow a trend similar to that of 2010.