It is important to persevere with the economic policy actions undertaken. In this way the levels of competitiveness needed to ensure the smooth functioning of the euro area may be regained, the ordinary funding channels restored and the imbalances built up in recent years, in particular in relation to public finances, finally corrected. These requirements must be met if the economy is to begin to generate employment and to grow. The adjustment continues to fall on domestic demand, weighed down by the correction of imbalances, the fiscal consolidation drive and tighter financing conditions. The external sector continues to soften the impact of domestic spending on activity, due both to the buoyancy of exports and to the slackness of imports from the rest of the world, but its contribution is insufficient to halt the decline in output. In this setting, job destruction continued apace in 2011 and in 2012 to date. And, owing to the uncertain prospects for the Spanish economy, a turnaround is not expected in the very short term. However, as this episode is progressively overcome, the approved labour market reforms will foreseeably have a favourable impact on employment generation, contribute to adjusting working conditions to firms’ specific circumstances and provide for a more efficient reallocation of productive resources, which should ultimately prompt an increase in productivity levels. The cyclical weakness and the adverse behaviour of the labour market have not fed through sufficiently to the cost and price-formation mechanism, which still shows considerable inertia.

Another welcome development to the capital market is the recent B+ sovereign rating assigned to the country, as well as, the reclassification of Zambia as a low middle income country. These developments reflect the country’s recent strong economic performance. As  BIS central bankers’ speeches  1  you may be aware, GDP growth has averaged above 6% over the last five years, supported by low inflation and a positive external sector performance. These favorable developments put the Zambian business community and Government in a strong position to access finance for sustained economic growth and improved living conditions of all citizens. Ladies and Gentlemen, in the medium to long-term the prospects for Zambia’s economy are bright. The robust GDP Growth momentum is expected to be maintained premised on favourable growth performance in mining, agriculture, construction, tourism, manufacturing among other sectors. This will be supported by favourable commodity prices on the international market, Government’s investment in infrastructure and expected increases in foreign direct investment. Further, inflation is expected to remain in single digits owing to prudent macroeconomic policies and the bumper harvest recorded during the 2010/11 harvest season which is expected to dampen any negative effects on overall inflation through the food component. Accordingly, interest rates are expected to decline further. In addition, the macroeconomic environment is expected to remain favourable due to a projected strong external sector performance. In this regard, the capital market has an important role to play.