the assessment that the albanian economic activity will grow slowly over the period ahead, at levels comparable with those of the first half of the year. foreign demand will be the driver of economic growth in the coming quarters, while the first - half fiscal stimulus is likely to lack in the second half of the year. indirect data do not yet reveal any signals for consumption and private investment recovery. the below - potential economic growth will be associated with weak demand - side inflationary pressures and in the absence of any unforeseen supply - side shocks, consumer prices will increase at low rates. annual inflation, as to four quarters ahead, is expected to fluctuate around the 1. 1 % – 3. 8 % range, with a 90 % probability of occurrence. against this setting, our monetary policy will keep on preserving its stimulating nature even over the quarters ahead. also, we will continue to provide the banking system with all the liquidity needed for a smooth functioning of financial markets. concluding, the supervisory council decided to lower the key interest rate by 0. 25 percentage points, to 3. 50 %. the supervisory council deems that this lowering would create better monetary conditions to meet our medium - term inflation target, which will continue to guide our monetary policy. bis central bankers ’ speeches

to determine the inflation performance. the sluggish growth of aggregate demand is associated with low increase in investments, employment, wages and labour costs in the economy. this chain of factors is further translated into weak pressures for consumer price rise. it is also confirmed by the record low rates of core inflation over this period. on the supply side, the low price rise in the domestic market has reflected the price stability in global markets and economic agents ’ anchored inflation expectations. with regard to economic developments, instat data show that the first - quarter economic growth was 1. 7 %, remaining similar to the previous year ’ s figure. the economic activity expansion in the first quarter relied heavily on the industrial sector growth, while the agriculture and services sectors marked a positive but weak growth. by contrast, construction sector continued to contract. available information on the second quarter suggests that the economy performed better, mainly reflecting the high fiscal stimulus during this period. bis central bankers ’ speeches from the demand components perspective, economic growth during the first half of the year owes mainly to higher exports and public spending over this period, while the contribution of consumption and private investments appear weak. though monetary stimuli increased during the last quarter, uncertainties about the future contracted consumption and private investments. these uncertainties are reflected in a cautious behaviour of albanian households and businesses and their reluctance to take risks. their higher inclination to save and the lower degree of borrowing improve the private sector balance sheets but impact negatively the aggregate demand and medium - term economic growth. performance of fiscal indicators in the first six months of the year reflected an expansionary fiscal policy, which was manifested in higher budget spending and fiscal deficit. this stance was more noticeable in the second quarter. the increase in budget spending impacted positively on the economic growth over this period, but the overall impact of the fiscal policy will depend on the degree of observing the budget indicators adopted for 2013. public spending marked 12. 2 % annual growth in the first half of this year, influenced heavily by capital spending. on the other hand, budget revenues for this period were down by 2. 9 % on a year earlier, reflecting the weak performance of tax revenues. these developments are materialised in a significantly increased budget deficit, which turned out to be twice higher than a year earlier. the budget deficit dynamics was reflected in a higher public debt over this period. at the end of the first quarter, the public debt as a share of gdp accounted for 63. 3 %. the public debt constitutes one of the major