risks in the economy to be spread out, shared, and more efficiently managed. and the third lesson is the need to have in place an effective mechanism of economic and financial surveillance to identify potential risks, especially those relating to financial sector and capital flows issues, which are the two most important risks for emerging markets. all three lessons are now well known. and we have seen conscious efforts by national governments and ifi ’ s such as the imf to take heed of these lessons. in asia, at the national level, we see a region - wide move toward a more flexible exchange rate regime, with a disciplined framework in the conduct of monetary and fiscal policies. as for the financial sector, after the initial restructuring and consolidation, the framework of policy has moved towards risk - based supervision, to an adherence to international standards, and to the undertakings of formal financial sector assessments either under fsap or within the country ’ s own financial stability evaluation framework. at the international level, the imf has also come up with many new and important initiatives. as for the financial sector, its financial surveillance process has been deepened with the introduction of fsap and the surveillance of international capital markets under the financial stability forum, and the publication of the global financial stability report. more importantly, the recent initiatives on the new direction of financial sector surveillance is another important step in understanding the linkages between macroeconomic stability and financial vulnerabilities. the new direction aims to integrate financial sector analysis and issues with the article iv process, and then to link the bilateral surveillance with multilateral surveillance. in our view, this is an ambitious undertaking, but is a move in the right direction. the challenge, as we see it, will come from the implementation process, especially on the issue of what should be the adequate scope in terms of issues to be covered, choice of countries, and the analytical approach to be used. these are important questions that will need to be worked out, taking into account resources at the fund. our view is that the initial move on the new direction should not be overly ambitious. it is better for the process to move forward gradually, focusing first on the most systemically important economies. but as far as emerging markets economies are concerned, if surveillance is to be effective in preempting crisis, then i think one question that can be asked is whether the improvements that we are now seeing, as well as the new direction to be taken, are adequate or credible as a mechanism of

for further increase of the monetary stimulus to the economy during the first quarter of the year. the bank of albania has lowered the key interest rate twice, bringing it down to the historic low of 4. 25 %. such a decision, besides being in line with maintaining price stability over the medium term, provides the appropriate conditions for boosting private demand at home. according to recent data from instat, the albanian economy accelerated the growth rate in the fourth quarter of the previous year, posting 3. 8 % annual growth. the economic activity upturn was driven mainly by output increase in the services sector. value added of this sector surged 7. 5 % in annual terms, with a higher contribution by the branch of trade, transport and other services. similarly, the construction and agriculture sectors posted bis central bankers ’ speeches positive but low annual growth rates, 1. 2 % and 1. 9 %, respectively. positive contribution to economic growth was also provided by the branches of extractive industry and the processing industry, but they did not manage to balance the significant contraction in the branch of “ electrical energy, water and gas ”, which has resulted in negative contribution by the industry sector to the domestic product growth. from the perspective of aggregate demand components, economic growth in albania continued to be driven by foreign demand also in the last quarter of the past year. notwithstanding unfavourable developments in the global economy, net exports in real terms have shown higher growth rates in this period. in addition to foreign demand, the public sector demand provided a high contribution, in the fourth quarter of the past year, in the form of increased capital expenditure. in turn, private consumption and investments, while showing signals of recovery, were assessed as slow during the fourth quarter of 2011. statistics on the real economy for the first quarter of 2012 are only partially available. indirect data suggest that aggregate demand has carried forward positive growth rates, but growth remains significantly below the potential of the albanian economy. macroeconomic factors determining private consumption and investments, and a prudent fiscal policy sustain the assessment for contained growth of the domestic demand in the first quarter of the year. moreover, in the absence of complete data and in real terms on developments in the external sector of the economy, assessments suggest that the contribution of foreign demand to economic growth will be lower than in the past year. fiscal policy was subject to a consolidation nature over the first quarter of 2012, in line with its objectives to keep budget deficit and public debt in check. the contained