. banking credit and foreign direct investments are the two main financing sources of private sector ’ s long - term investments slowdown in albania. in this light, the bank of albania deems that businesses and banking system have room for closer collaboration and better mutual understanding to support crediting. financial markets operated under liquidity terms and showed low interest rate fluctuation. indicators related to soundness of the banking system are positive and stable, and adequate to enhance financial intermediation. interest rates in the domestic currency trended downward in april and may, notably in inter - bank and deposits markets. this tendency was followed by increased inter - bank trading and lek deposits. on the other side, the relatively high yields rates of government treasury bills, since the beginning of year, seem to considerably factorise structural changes in primary market and do not transmit added inflationary pressures. in the light of the bank of albania ’ s analysis on the expected fiscal and monetary developments, this trend may return in the second half of year, along with the improved demand and supply ratios for public sector securities. basic projections on the expected economic performance in the future continue to align with our previous estimations for an economic growth, but below its potential. economic slowdown in albania ’ s trade partner countries is expected to impose a sluggish foreign demand during the rest of year. given the lack of room for a substantial fiscal stimulus, the main drivers of domestic demand will be the consumption and private investment, which have shown few recovering signal so far. overall, the expected economic developments at home and abroad are expected to condition a slow rise in consumption prices at home. real and monetary sectors convey low pressures on prices ; also, inflation in global markets is expected to be low, whereas inflationary expectations are anchored. the gradual subsiding supply shocks and the termination of base effects impact are expected to be followed by a slight rising inflation trend in the second half of year. at a high probability, consumer prices inflation is expected to remain below the target over the medium run. these circumstances, in the absence of unexpected shocks, encourage the further bis central bankers ’ speeches maintaining and strengthening of the monetary policy ’ s stimulating nature. the reconfirmed commitment of the government to continue the fiscal consolidation process even in the next review of budget, as well as the calmer situation in global markets, will pave the way to review the monetary policy position. * * * based on the analysis of the information set out above, the supervisory council

solution to this problem is a priority in the verge of increasing global demand and energy prices. speeding up the privatization process of the remaining state assets is another important step forward. special attention should be paid to structural reforms, particularly property rights and legal framework. in our opinion services, construction and in particular agriculture will remain driving forces of the gdp growth in the coming years. therefore i would strongly agree with any initiative that encourages fdi ’ s in these sectors through attractive laws and other measures. i believe fdi ’ s are very important for providing long term stability of the foreign sector. moreover the productivity growth that usually follows fdi ’ s inflows will play e significant role in reducing current account deficit. our economy needs more foreign direct investments hence country credit ratings constitute a chief priority for our economy. it is my belief that fdi ’ s represent a regional rather than an individual challenge for the south east europe. countries in the region must coordinate their efforts toward creating a regional market. regional infrastructure projects will significantly increase attractiveness and competitiveness as well as international financial market awareness toward our region. it will improve confidence and provide necessary economic incentives to enter in the region leading to higher fdi ’ s inflows for each economy. inflation our economy has experienced a relatively long period of stable prices. annual inflation figure as measured by the consumer price index, for the last 12 months is reported at 2. 4 percent. both monetary and fiscal policies have been important factors in keeping inflation low. however, recently inflation pressures have accelerated. the fast growth of credit to economy, the steep increase of oil prices, administrative increase of energy prices, as well as other risks have the potential to create inflationary pressures and pose risk to elevate inflation expectations. bank of albania will take all necessary actions to ensure an inflation rate of 3 per cent with a tolerance band of ± 1 percent, in the short and long run. interest rates during the recent years interest rates have dropped reflecting the ease of monetary policy. this has been a general trend for all financial assets either in lek or foreign currency. on average banking system applies 9. 7 percent for loans in domestic currency. the yield of 12 month government securities dropped at a minimum of 5. 74 percent in june 2006. however, following the last decision of the bank of albania and latest trends in global markets, a modest increase in interest rates has been observed during the last three months for both domestic and foreign financial instruments. we expect this trend to persist within