long as it is characterized by a high current account deficit. the shift of deficit to more stable levels will be at the forefront of the country ’ s economic policies in the medium and long run. as we have continuously stated, fiscal policy was counter - cyclical throughout 2009, underpinning the trend that began in 2007 – 2008. budget deficit amounted to all 79. 9 billion in 2009, reflecting at the same time the accelerated increase of budget expenditure and slowdown of fiscal revenues. budget expenditure increased 8 percent in 2009, while revenues grew only 2. 7 percent, in part owing to the gradual contraction of economic activity. the bank of albania considers that fiscal policy should prioritize the measures required to guarantee the sustainability of public debt. the increase of the latter during 2009 and the higher sensitivity of the financial markets to this indicator, call for the reliable commitment of fiscal policy with respect to its long - term sustainability. therefore it is crucial to reach the projected fiscal balance through the conditioning of the fiscal expenditure carried out by the budget revenues ’ collection rates. on the one hand, this policy implies a smaller fiscal stimulus for 2010, but on the other it will lower the risk premiums in economy and provide more room for borrowing in the domestic financial markets of the private sector of the economy. the latest monetary developments attest to the low growth of broad money and lower banking intermediation in lending to the public and private sector. however, the banking system ’ s liquidity indicators seem to have become more stable. in annual nominal terms, money growth was 7 percent, similar to november ’ s growth rate. deposits grew for the second consecutive month, owing to a large extent to the increase of time deposits. relative to the previous year, private sector lending grew 11 percent in nominal terms. in real terms, it grew by only 4 percent. the growth of lending owes mainly to the higher lending to business for liquidity purposes. by contrast, household loans continued to contract in annual terms. despite the improved lending activity in december, its annual growth rate remains low. the slow lending performance owes to the high risk premiums materialized in tight lending conditions, and to the economic agents ’ uncertainty for the future, materialized in low demand for private sector credit. the exchange rate depreciated further in january, albeit at lower paces than in the previous month. in nominal effective annual terms, it depreciated 8 percent in january. monthly developments attest to the slight depreciation of the all

the last quarter of 2009, featuring lower trade deficit during this period. however, given its relatively small share of the gdp, the impact of this correction to the economic growth of 2010 is projected to be moderate. annual inflation marked 3. 6 percent in january while average annual inflation rate increased to 2. 4 percent. the annual increase in consumer prices was in line with the bank of albania ’ s target for inflation in january, standing at the upper limit of the tolerance band. the upward inflation trend in january owes mainly to the higher food prices following the latter ’ s rise in the global markets and the lagged effect of the exchange rate depreciation. the contribution of other consumer price basket items to inflation, albeit upward, was still low. the latest energy price rise effect on february ’ s inflation is expected to contribute by 0. 5 percentage points to the annual inflation rate. the bank of albania assesses that the performance of the albanian economy has yielded balanced inflationary pressures. this is also confirmed by the performance of core and non - traded inflation, whose rates marked 1. 4 and 1. 7 percent, respectively, in january. these trends suggest that the inflationary pressures exerted by domestic demand are weak, while the increase of inflation over the last months owes mainly to supply - side factors. the bank of albania considers that these factors will only affect temporarily and their pressures on inflation are expected to gradually dampen in 2010. the same performance seems to be also expected by the main economic agents, whose inflation expectations remain anchored close to the bank of albania ’ s target. the bank of albania has been pursuing a prudent monetary policy over this period. the increase of monetary stimulus in economy, without prejudice to macroeconomic stability and keeping the economic agents ’ expectations stable, was the major focus of our policy. our decisions have in particular aimed at providing adequate monetary conditions for the observance of the inflation target in the medium run and smoothing out the albanian economy ’ s way to more stable economic and financial balances. this philosophy will continue to guide our decision - making in the period to follow. the latest data on albania ’ s external position cover only foreign trade. the analysis attests to the annual narrowing of trade deficit by about 17 percent in december. in annual terms, exports of goods increased 27 percent, while imports declined 10 percent. the relative coverage ratio of imports with exports increased to 23 percent. despite this performance, the external position of the albanian economy remains a concern as