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. the bank of albania holds that last year ’ s successful harmonisation of the monetary policy with the fiscal policy should continue even further in 2011. fiscal and monetary policies should aim at the stability of these indicators, in addition to supporting economic growth. the influence of supply and demand factors over the exchange rate or the national currency is expected to be balanced. inflationary pressures are expected to be moderate this year, although prices of imported goods are an apparent risk. bis central bankers ’ speeches the bank of albania will maintain its monetary policy flexibility to prevent any undesired inflation development. honourable participants, next, i would like to dwell in more details on the banking sector situation and some issues that the bank of albania considers pivotal to the role of this sector in financial mediation and public relations, with a mutual benefit. in recent years, the banking sector, a driving force in the financial sector, has been a powerful supporter of the country ’ s economic growth through an active role in financial mediation. certainly, banking activities involve risks, but the international financial crisis of the last three years proved that the banking sector in our country was stable and did not need public assistance to overcome the situation. last year, the financial situation of the banking sector is assessed, generally, better than that of the preceding year. regardless of the growing value of problematic loans, the banking sector marked a financial performance many times higher than that of 2009. liquidity situation is clearly improved with a stable growth in deposits. for that reason, the need of the banking sector for liquidity by the bank of albania is substantially reduced. the banking sector is well - capitalised thanks to cautiousness in expanding activities and increase of capital by shareholders. in spite of this good progress of the banking sector, rapid improvement is needed in some areas on which the bank of albania has focused its supervisory activity. first area relates to the need for crediting expansion and loan quality improvement. both elements may support each - other, if careful actions are taken. crediting expansion will be better supported during 2011, due to

have supplied the banking system with the liquidity it needs for smooth operation. finally, through the review of regulatory norms and application of a prudent supervision of the banking system, we have managed to establish a stable financial environment for the country ’ s long - term development. boosted confidence of the public in the banking system was followed by rapid increase of bank deposits, thus reducing reliance on foreign short - term financing. all these initiatives, coordinated with other policies, have proven effective. inflation remains subdued and in check, inflationary expectations are anchored, macroeconomic environment is steady and financial stability is consolidated. looking ahead, the bank of albania holds that the albanian economy will continue to face the above - cited concerns over 2013 and beyond. although improving, economic activity is expected to remain below its potential, followed by low inflationary pressures, creating premises for maintaining stimulating monetary conditions in the future. likewise, our bis central bankers ’ speeches projections suggest that external balances of the economy are expected to improve. on the other hand, slow economic growth rates may generate pressures on debt stability indicators, unless they are identified and taken into consideration in fiscal policy decisions. in bank of albania ’ s view, growth rate recovery will require combining the cyclical stimulus of the economy with structural measures that expand the growth potential. regarding the cyclical aspect, the bank of albania holds that macroeconomic policies are rightfully stimulating. in the absence of space, fiscal policy should continue to be oriented towards long - term stability of debt indicators. the monetary stimulus is expected to be transmitted more completely in the upcoming period. we continue to underline our message that businesses and consumers should have a more realistic approach on sound perspectives for the country ’ s development as well as revise up their consumption and investment plans. in the structural aspect, we welcome reforms and initiatives that contribute to the country ’ s growth potential, through developing infrastructure, improving the legal framework, enhancing productivity and competitiveness of the albanian economy, attracting foreign investments and maintaining and improving macroeconomic stability at home. the bank of albania is fully committed and engaged in the latter. our key focus will continue to be : maintaining price stability and establishing pre - requisites to step - up financial stability. therefore, we are convinced that we are providing a valuable service to long - term economic growth and welfare. bis central bankers ’ speeches