spending, mainly due to rapid growth of capital expenditures. budget revenues maintained a slower - than projected rate, due to slow - down in the economic growth rate during this period. consequently, the additional budget spending has been financed through the use of privatization receipts and the higher public borrowing. this policy has exerted pressure over the increase of government debt securities ’ interest rates of long - term maturity. financial markets attested to an improved liquidity situation and agent ’ s recovered confidence in these markets. the persistent bank of albania ’ s liquidity supply to the money market helped to calm the market participants down and supply the market with funds, which served to the private sector ’ s domestic currency intermediation. the needs for liquidity in the interbank market have decreased, hence exerting no pressure on short - term interest rates. the prudent monetary policy of the bank of albania has helped relieve the tension in the financial market, while the latest base interest rate cut should be translated into greater lending to the private sector. as we have already stated even previously, the bank of albania regards the future albanian economic activity with a prudent optimism. i mean, in spite of the great shock we have gone through, the macroeconomic and financial stability of the country has not been affected. furthermore, the restoring of confidence in the banking system opens the way to recovery of the lending process and sustaining of the economy with funds. on the other hand, the bank of albania keeps on pursuing a prudent stance, because the financial risks on the economy have not been completely overcome. the banking system has still liquidity shortages, whereas the global economy continues to be frail. therefore, the economic prospect will depend on our joint work and on the performance of global economic and financial markets. dear participants, in the optics of historical developments and particularly of recent events, i would like to briefly dwell upon several vulnerabilities that we, as the politic, supervisory and regulatory authority, have highlighted, as well as the lessons we should draw and the issues we should address for the country ’ s further economic development. lessons from the crisis right from the beginning, i would like to emphasize that generally, the philosophy of the country ’ s economic development has been accurate. market openness and increased competition have made the albanian economy benefit the fruits of private sector initiatives. the practice of economies based on free market principles has broadly indicated that this sector remains the most efficient engine of the economic activity. this process has been sustained

has benefited from a positive demographic position as a result of its young and vibrant labour force, but has suffered from continuous net migration towards more developed countries. while emigration has provided a steady flow of remittances and has eased labour market pressures, it has also drained the country of its highly skilled labour force. the latter might have long - term repercussions on innovation and can have implications on the so - far convergence progress realised. with that being said, let me now conclude. 3. towards a steady convergence path see countries are at risk of falling into ‘ a middle income trap ’. as such the economic systems need to be transformed, through carefully - designed and well - targeted policies that promote domestic innovation, modernise institutions, and cushion the effects of adverse demographics. it is clear that the load of reforms remains with the see countries authorities ’ themselves. a domestic ownership of reforms is of utmost importance for the democratic process and the ultimate success of convergence. however, while these policies need to be carried out regardless of external factors, eu integration has a fundamental importance on economic convergence dynamics. after the economic and financial crisis, appetite for further eu enlargement declined, due to waning popular support and shifting policy priorities towards reform. as the eu ’ s mood drifted away from enlargement and from further integration, countries relaxed their drive for reform. these developments coincided, or let me rather say, induced a stall in the convergence process in several see countries. as a final thought, the eu institutions themselves can facilitate this process further through : 2 / 3 bis central bankers'speeches providing transparent and objective eu integration guidelines ; emphasising the need of institutional convergence throughout this process ; continued monitoring and reporting on the progress of individual countries. on one hand, this will enhance the positive leverage of the eu integration process on the development of our countries and societies. on the other, it will increase the cost of noncompliance and possibly induce positive compliance competition amongst the countries in the region. thank you! 3 / 3 bis central bankers'speeches