confirms our assessments for contained inflation pressures suggesting that money supply growth rates are moderate and in line with the economy ’ s demand for real money. in average terms, m3 annual growth was 11. 3 % in january – may triggered by a steady growth of deposits in the banking system. demand for money is dominated by public sector demand for funding, while the private sector ’ s demand was more moderate. lending to the private sector increased on average by 11. 5 % during the first five months of the year, about 1. 5 p. p. higher than 2010 h2. in contrast to previous years, lending is oriented more towards the national currency : all - denominated loans increased by about 14 % as at may. lending continues to be impacted by a moderate demand for loans while the banking system has adopted prudent lending practices, with tightened lending standards for certain market segments. financial markets were calm reflecting low risk premiums and a good liquidity situation. in the interbank market, interest rates fluctuated around the key interest rate, following its latest increase in march. the increase in the key interest rate is also followed by the yields in the bis central bankers ’ speeches government securities primary market and is reflected less in the all - denominated deposits and loans, due to factors of liquidity and risk that accompany financial intermediation. the yields curve has retained its trend, indicating low inflation premiums in financial markets. summing up the expected economic performance, our projections and assessments suggest that economic growth will continue even in 2011 h2. aggregate demand will be supported less by the public sector and foreign demand, while the private sector is expected to provide a larger contribution to the economy. nevertheless, economic growth is not expected to fill completely the negative output gap. the albanian economy will continue to have spare capacities in the capital and labour markets, avoiding potential wage – inflation spirals and producing contained inflation pressures in the medium run. in addition, imported inflation is expected to decline and administered prices effects are expected to be eliminated in the medium run. in the presence of anchored inflation expectations by economic agents, the bank of albania deems that consumer price inflation will gradually settle close to its target of 3 % in the period ahead. * * * drawing on the information above, the supervisory council of the bank of albania deemed that inflationary pressures remain, in the short run, high. however, they are controlled and in the medium run they are expected to follow a downward trajectory. in the absence

the first and second quarters of 2011 relied mostly on the industry and services sectors growth. owing to foreign demand, industrial output increased by 12. 3 % in annual terms, providing major contribution to the expansion of the economy in the first quarter. the services sector, topped by “ trade, hotels and restaurants ”, continued to support economic growth, although less than last year ’ s quarters. this sector ’ s annual growth marked 1. 8 % in the first quarter of 2011. the services sector performance is closely connected to consumer spending performance, which i will address later. after five quarters of contraction, the construction sector posted annual growth of 4. 6 %, triggered by higher public investments during this period. lastly, agriculture maintained growth and contribution rates similar to the last quarter of 2010. indirect data obtained from business surveys and monetary indicators suggest that this performance is and will continue to be along the same lines even during the second quarter and beyond. on the demand side, economic activity relied mostly on foreign demand and public spending, while private sector contribution was low. indirect data support the assessment for a weak private consumption performance during 2011 h1. in spite of increased available income and improved bank lending – as indicated by higher employment, real wage and consumer and house - purchase loans – consumer confidence was low. the albanian consumer continues to be cautious in spending, displaying added saving preference over a number of quarters. naturally, this behaviour is a structural correction of the consumption model shown over the past years, but the slow performance of consumer spending reflects, also, added uncertainty about the future. while the first component is welcomed, in the context of preserving macro - and micro balances, the second component may and should be corrected : households consumption has the potential to grow and be stimulated in the short and medium run. taking into account the significant impact of consumption on the gdp, its performance will substantially condition economic growth during this time span. bis central bankers ’ speeches private investments increased at moderate pace during 2011 h1 as illustrated by higher loans for investment and imports of capital goods. although financial terms – availability, liquidity and bank interest rates – are significantly improved, the existence of spare capacities in the economy limits the demand of businesses for investment. in the short run, the position of economic activity operating below its potential conditions a slow performance of investments. in the medium run, investments performance will reflect developments in internal and foreign demand performance. given the need for a more competitive albanian economy and its further orientation towards exports, stimulation of investment