These mechanisms will become increasingly important as regional integration continues to deepen and as more Malaysian financial institutions venture overseas. The progress that has been achieved in the financial sector has surpassed the initial expectations outlined in the financial sector masterplan. The foundation of a vibrant, sound, stable and resilient financial sector accords the opportunity of advancing the sector to a new level where new opportunities with new formulas and strategies for success can be achieved. The financial sector has been key in supporting the transformation of the Malaysian economy, to increase its significance and to promote a more diversified economic structure. This has been achieved by the increased financing extended via the banking system and capital market. In particular, outstanding loans and private debt securities expanded by an average of 7.8% for the period 2001-2007. Malaysia is also ranked third in terms of access to credit amongst 175 countries surveyed by the World Bank in the Doing Business Report 2007. In an environment of rising incomes and expanding domestic demand, the further  BIS Review 71/2008  5  modernization of retail banking will be important going forward. With increasing financial literacy and growing consumer sophistication, product pioneering and cross-selling, the trend towards electronic financial transactions will gain significance. Increasingly, loans to the corporate sector will become less dominant with an expanding and efficient functioning capital market. In particular, the bond market presents opportunities for increased corporate advisory and debt and equity underwriting business. Private debt securities now represent 45.5% of GDP.

In the near future, the exporting sector of the economy is expected to be sustained by improved demand in Albania’s trading partners. Fiscal indicators were characterised by higher revenues and lower expenditures during the first two months of the year. As of February, budget revenues increased 4.9%, year on year, whereas expenditure and budget deficit fell 9% and 82%, respectively. Expenditures  BIS central bankers’ speeches  1  decreased mainly due to downward capital spending, while revenues upped thanks to increase in tax revenues. These developments have determined a consolidating trend of the fiscal policy and have kept its impact on aggregate demand and economic growth subdued. Excluding the effect of payment arrears, the consolidating trend of the fiscal policy is expected to be maintained over the medium-term period. As always, the Bank of Albania endorses and encourages measures for fiscal consolidation, considering them as necessary for reducing risk premia in the economy and maintaining the country’s medium and long-term stability. Moreover, the Government will pay a part of its arrears to businesses within this budget year. This development is expected to improve the private sector’s balance sheets and demand. In response to the easing monetary policy and the liquidity situation, financial markets have been calm, in terms of trading, showing a tendency to cut interest rates. The latest key interest rate cut in February is transmitted to short-term interest rates in the money market.