- firm and across - firm channels of tfp growth. within firms, firms that stay small tend to be less likely to invest in new technologies, in particular ict investments that are crucial to succeed in the digital economy. this is because, among other things, small firms face relatively higher fixed costs when adopting ict 9, while they exhibit higher risk aversion and encounter greater difficulties in collecting resources to finance more innovative projects. 10 and if firms do not grow, it also weakens the potential for productivity growth through the across - firm channel : the more resources are concentrated in the most productive firms in each sector, the faster aggregate tfp grows. for these and other reasons, analysis by the imf finds that firm size is strongly positively correlated with tfp in certain countries, with micro firms being about a third less productive than large firms. 11 this demonstrates that creating the conditions for a more dynamic distribution of firm growth could make a decisive difference to tfp developments in the euro area – and this is where the need for further structural reforms comes in. let me lay out just a few of the channels through which structural reforms could support this process. structural reforms and firm dynamics first, by removing regulations that encourage firms to stay below certain size thresholds. in italy, for example, some studies argue that labour regulations that kick - in at the 15 employees threshold may have encouraged firms to stay small in the past, although these are de facto now no longer in force. 12 a similar phenomenon has been observed in france, where sizecontingent regulations appear to cause firms to cluster below 50 employees. 13 in spain, too, there is evidence for substantial bunching of firms just below the “ large taxpayer ” threshold. 14 second, by making it easier for new firms to enter markets and non - productive ones to exit. oecd research suggests that dynamic firm turnover depends strongly on product market reforms that raise competitive pressures, labour market reforms that allow firms to adjust more easily to changing market conditions, and the efficiency of the legal framework in areas such de kok, j. et al ( 2011 ), " do smes create more and better jobs ", eim business & policy research report, november 2011. criscuolo, gal and menon ( 2014 ), “ the dynamics of employment growth : new evidence from 18 countries ”, oecd science, technology and industry policy papers no. 14, oecd publishing. hitt, wu, and zhou ( 2002 ) find

of weak demand - induced inflationary pressures. developments in the real sector of the economy conditioned the controlled price rise of domestic products. these tendencies have been reflected in the downward trend of core inflation and low non - traded inflation of the consumer price index basket. consumer price performance continued to reflect the low pressures from other cost elements. in particular, import prices were low and given the relative exchange - rate stability, they transmitted low pressures from imported inflation. following the economic contraction in the first quarter, albanian economy fell by 2. 0 % y - o - y, in the second quarter. economic activity growth was generated by agriculture, industry sectors and some branches of the services sector, while the construction sector fell sharply. bis central bankers ’ speeches from the viewpoint of aggregate demand, the second quarter ’ s economic growth was mostly supported by the foreign demand, while the domestic demand remained sluggish. consumer spending, though higher than in the first quarter, did not return to past year ’ s rates of increase. this component of the domestic demand remained influenced by the perceived uncertainty, lacked dynamisms in the labour market and slowed available income. confronted with a low ultimate demand for their products and in the presence of spare capacities and relatively tight lending terms, private investments also remained low. in particular, during the first half of the year, the low private investment level reflected households ’ low demand for housing. public spending and fiscal stimulus were also weak, reflecting the consolidating fiscal policy and observing the fiscal restrictions required by law. fiscal consolidation, which is based mostly on reduced expenditure, is illustrated through the downward trend of budget deficit over the period. the budget deficit resulted about all 25. 7 billion during the first three quarters of the year, down by about 19 %, y - o - y. until september, the realised expenditures were about 0. 2 % lower than a year earlier, while the budget income increased 2. 3 %. the data on developments in the external sector of the economy show albania ’ s significantly improved external position. the value of exports increased 6. 7 %, y - o - y, in the first quarter, reflecting the moderation in the foreign demand and performance of global market prices. over the period, imports contracted by 0. 9 %, y - o - y. these developments led to an annual contraction of trade deficit by 5. 4 % until august, positively influencing the aggregate demand growth. also, the sharply decreased current account deficit in the second quarter