ardian fullani : recent economic and monetary developments in albania speech by mr ardian fullani, governor of the bank of albania, at the joint press conference with the albanian minister of finance and the imf mission chief for albania, tirana, 22 june 2011. * * * dear media representatives, in the last two weeks, a team of the international monetary fund ( imf ) led by mr gerwin bell, mission chief, visited albania. during this visit, we had intensive discussions on the current economic developments, the economy ’ s expected performance and appropriate orientation of macroeconomic policies. this visit in the framework of article 4 consultation focused also on structural issues of the albanian economy, highlighting the steps to be made for ensuring sustainable long - term growth. brief overview of key issues discussed first, the 2010 and early 2011 economic and financial developments showed that, overall, the albanian economy overcame the global crisis effects with success and has the prerequisites to generate economic growth in the period ahead. foreign demand was the main contributor to the 2010 economic growth, while the current year is expected to be characterised by a resurgence of domestic demand and slower growth rates of albanian exports. overall, the macroeconomic situation is balanced, characterised by low and controlled inflation ; safe, liquid and well - capitalised financial system ; improving financial markets ; and improved current account position. these developments reflect, inter alia, the relevant policies, which have proven effective in buffering large shocks from the global crisis. i take this opportunity to point out that the bank of albania ’ s efforts to keep inflation in check and anchor inflationary expectations, as well as its regulatory and supervisory measures to guarantee financial system stability managed to reduce shock - buffering costs and prevented undesirable consequences. second, as regards the economy ’ s expected performance in the medium and long run, the conclusion reached after the two - week long consultations was that the albanian economy is expected to remain in positive territory of economic growth. however, growth rates will clearly depend on the resurgence of the domestic demand, which is suffering from insecurity related to national and international developments. consumption and investments continue to suffer from added prudence by economic agents, while financial conditions and banking system capacity to credit the economy are improved. furthermore, higher inflation rates, noted during the first months of 2011, are expected to drop in the upcoming period. this reveals the foreign origin of shocks that have led to increased prices and reflects internal economic and financial conditions as well as our

the albanian authorities have engaged in comprehensive reforms of the property rights, of the tax regime, of the electricity sector, of the general infrastructure, and remain engaged in the fight against informality. the most recent measure in this regard is a banking sector regulation that aims to put an end to the practice of lending through uncertified company balance sheets. further, to enhance efficiency and tackle corruption and informality, a determined drive to improve the functioning of the public administration, which broadly speaking encompasses also the judicial system reform, has been undertaken. in order to increase economic stability and to improve financial resilience, we have initiated a wide ranging set of reforms. to that end, the government has improved its public finance management procedures, has adopted a fiscal responsibility framework, and has undertaken measures to reduce debt. the bank of albania has strived to model itself after the ecb. its professionalism has increased while its independence, transparency and credibility have all improved. through a joint effort of institutional stakeholders, we have 2 / 3 bis central bankers'speeches managed to reform the financial supervisory authority and enhance the role of the deposit insurance authority. together with the albanian government, we have implemented a comprehensive npl resolution strategy, which has already brought encouraging results, we have approved a bank resolution law and we have jointly designed a de - euroization strategy, aimed at tackling financial vulnerabilities, improving the transmission mechanism and intensifying the use of the domestic currency. we have also established a new interinstitutional financial stability advisory group, vested with coordination powers on systemically - important stability – related issues. in order to further develop financial markets, the albanian authorities have accelerated the development of capital markets, through the establishment of the albanian stock exchange, the licensing and functioning of several investment and asset management funds, the encouragement of the on - going consolidation in the bank and non - bank financial institutions, the tax encouragement of private pension schemes, the on - going efforts to improve the functioning of secondary markets for government papers, etc. however, i am convinced the sharing regional experience would result in an additional impetus to the process. furthermore, regional solutions can be sought to common problems. this brings me to my last point. improving regional cooperation coordination and cooperation cannot run standalone in an ever integrated and intertwined world. the same concept applies to our region, where policy initiatives, aimed at achieving a common objective, should be implemented jointly. let me highlight a few potential cooperation areas : first,