developing country, albania is facing ( and will continue to face ) a rising competition, not only in the region but also beyond it. in our opinion, the long - term sustained development of the country and reduction of our structural weaknesses, imply necessarily increase of competitiveness of the albanian economy. ongoing structural reforms should be driven by ambitious goals and a realistic time horizon. structural reforms should aim at creating a more attractive climate for foreign and domestic investments, encouraging employment and further growth of welfare, providing : a sustainable macroeconomic environment ; an efficient and reliable financial system ; a legal, complete and transparent functional framework ; a modern infrastructure ; a qualified and competitive workforce in terms of cost ; and a clear perspective for a faster integration into the european union, which will open the way to convergence funds. fulfilment of all these criteria requires a joint commitment, and the bank of albania will play its role. personally, i remain convinced that increasing effectiveness of these reforms in light of this, would enable albania to make a qualitative step towards its integration. in conclusion, allow me to remind you that, besides the bank of albania ’ s annual report, the bank of albania ’ s financial statements and balance sheet, as certified by auditors, are submitted. thank you for your attention bis central bankers ’ speeches

saving, characterised by a shift to longer maturity - term deposits. easing lending terms during 2010 h2, stimulating measures taken by the bank of albania, and decreasing uncertainty and risk premiums were followed by a gradual credit growth. private sector loan portfolio expanded by 10 % in 2010, principally influenced by foreign - currency credit growth. this performance reflects prudential bank policies on loan portfolio quality and economic agents ’ moderate demand for loan. in general, lending continues to suffer from lack of demand and realistic, qualitative and valuable business plans for crediting. restoration of confidence in the financial system, macroeconomic stabilisation, and regulatory and supervisory measures taken by the bank of albania led to stabilisation and improvement of banking system capitalisation, liquidity and profitability indicators. 2. inflation and monetary policy annual consumer price inflation was on average 3. 6 % in 2010, remaining within the bank of albania ’ s targeted band. inflationary pressures were more concentrated in 2010 h1, mostly triggered by a rise in some administered prices. average annual inflation in 2010 h1 was 3. 9 %. in the following two quarters, relative stabilisation of the exchange rate and low inflationary pressures from the domestic demand contributed to the average inflation rate convergence around the bank of albania ’ s target. negative output gap generated contained inflationary pressures throughout 2010, thus balancing the national currency depreciation effect and the international market price rise. the prospects for the future show that the albanian economy is expected to operate below its potential even in the medium - term, putting downward pressures on inflation. as i highlighted earlier, in 2010, the bank of albania ’ s monetary policy was implemented in a macroeconomic environment with positive growth rates, contained inflationary pressures and anchored inflation expectations. this environment led to retaining the stimulating monetary policy stance that has been conducted since 2009. it triggered downward interest rates and completed even further the stimulating effects from the exchange rate depreciation. bis central bankers ’ speeches low interest rates favoured rise in domestic consumption and investments, whereas the depreciated exchange rate supported growth in albanian exports. reduction of the fiscal stimulus in 2010 h2 expanded the space for monetary policy conduct. in july 2010, the bank of albania lowered the key interest rate by 0. 25 percentage points, to its historic low of 5. 0 %. improvement of banking system liquidity condition and weak public sector demand for money supported the transmission of an easing policy to all segments of the financial markets in the last months