ardian fullani : recent economic and financial developments in albania speech by mr ardian fullani, governor of the bank of albania, at the joint press conference with the international monetary fund ( imf ) mission and the ministry of finance, tirana, 14 july 2010. * * * honourable participants and representatives of print and visual media, the visit of the international monetary fund mission is characterised by fruitful and intensive discussions. they were focused on the recent developments at home, their perspective in the near and far future and the role of structural and macroeconomic policies to encouraging and ensuring the sustainable development of the country. at the end of these discussions, we conclude that we share a common opinion as regards to the role and importance of prudent policies, which should have at their hart the maintenance of the basic economic balances, as an essential prerequisite for the stable and long - term growth. likely positive is the fact that the principal decision - taking institutions remain committed to perform concrete steps in due time to ensure this development. the bank of albania has already adopted this position and transparency, as a guidance of its decision - taking process in both the monetary policy and banking supervision fields. the respective explanation has composed the essence of our communication with the other players of the economy and with the public at large. allow me to deal in more details the issues discussed during these days, by summarising the opinion of the bank of albania in this regard. the economic developments of the last months carry encouraging signals, but also they show some weakness of the albanian economy and the compromises that policy - makers should realise and accept to accomplish their targets. the albanian economy, during the first half of 2010, has performed in line with our projections, being characterised by a positive, but slow growth of the economic activity. this growth is considerably grounded on the quick increase in exports, by denoting the improvement of the world economy, the more competitive position of the exchange rate, also the efforts of businesses and industries which carry out their activity in this sector to find new markets and the use of their competitive advantages. on the other hand, the domestic demand slowed down, mainly reflecting the still high uncertainty and the difficulties in the financing of the economic activity. as regards to the basic balances of the economy, this period is followed by controlled downward inflationary pressures, as well as correcting trends in the external position of the country. the economy financial health is improved, the confidence on banking system is recovered and the risk

. ludek niedermayer, deputy governor of the czech national bank, will first explain to you “ why and how ” inflation targeting was adopted in the czech republic – the first country to embrace this regime in our region. then, it will be for ms csermely agnes, director with the national bank of hungary, to share with us the “ lessons and challenges ” put forth by the hungarian experience with inflation targeting. our last speech for this event will be held by mr. cristian popa, deputy governor of the national bank of romania, showing you just where we, as central bank and as economy, stand in the preparation of the introduction of inflation targeting. what i do want to mention is the current debate on the appropriateness of adopting inflation targeting in romania. i am very happy that monetary policy steals the spotlight from football, at least temporarily. some acknowledged romanian economists claim that inflation targeting is not needed since future euro adoption requires fulfilling the grueling conditions of the erm - ii framework. in line with this argument, the exchange rate might prove to be a better choice for a nominal anchor. given the soon to be completed capital account liberalization, i believe that exchange rate management would be very difficult outside a currency board. although i am confident about our option, i respect all disagreeing opinions. for those retaining their doubts about the benefits of inflation targeting, there is one more argument, courtesy not of a renowned economist, but of the danish physicist niels bohr. when asked why he, an enlightened scientist, kept a horse - shoe on display in his house, his prompt answer was that “ it helps non - believers too ”. likewise, provided that the national bank of romania has convinced enough people of its commitments, non - believers should also enjoy the benefits of this policy change. ladies and gentlemen, let me now introduce rachel lomax, deputy governor of bank of england and member of the monetary policy committee. before passing on the floor, i would just like to mention that mrs. lomax has previously visited romania. ten years ago mrs. lomax was negotiating development programs in romania on behalf of the world bank with a team including myself and some other people in this audience. she is now here again to assist us in preparing to achieve another goal related to romania ’ s development, that of lasting price stability.