. put differently : keep the real economy going ; make sure economic growth does not shrink ; ensure your business maintains the same rates and that employment grows instead of reducing. this, dear participants, is may otherwise be referred to as ensuring the stability of the country ’ s economic growth. on behalf of the institution i represent, i would like to assure you that the bank of albania – being one of the main economic and financial decision - making authorities at home – remains entirely committed in this context. the times we are going through require all the development strategies, economic policies, measures and rules to undergo a strict cost / benefit analysis. in this context, although the crisis is not outlined yet, we have already drawn the first lessons from it. public and private authorities need to consider these lectures as future opportunities. mistakes can teach us how to better serve the future. we should have an optimistic view of the future and at the same time make sure our stance is realistic and consistent. time is ripe for albania to start producing more goods and services than before. despite the admirable progress in this context, the gap is still wide. agriculture and industry remain two important branches of the economy operating far from their potential. additionally, other sectors that have revitalized during the transition years require more orientation and tuning. these measures will enable better diversification of the albanian economy, augmenting its stability with the passing of time. other challenges i believe relate to the country ’ s external position, implying the reduction of current account deficit and the provision of alternative resources of foreign currency inflows. therefore, i think that the role of the state needs to be more pronounced, not only in terms of completing the legal and regulatory basis but also of concluding a number of important structural reforms, in particular those related to the land, ownership titles, pensions, to the support of the small and medium - size business, to the further improvement of business environment and the ongoing upgrade of national infrastructure. the further strengthening of safety nets, in the context of a stable fiscal and financial position, is an obligation whose accomplishment would reduce both the real and perceived risk of the albanian economy, hence creating incentives for the growth of domestic and foreign investments. time is ripe for the state budget to involve the participation of private entrepreneurs in strategic investment projects through joint financing programmes. the banking system plays a vital role. banking loan has played a key role in albania ’ s economic development. it has been a source of profit in your business and it has

can be observed. given that the bank continues to steadily pursue qqe and that inflation continues to be above 1 percent, medium - to long - term inflation expectations will likely follow an increasing trend, which will further reinforce inflationary pressure. upward drift of the phillips curve although somewhat technical, let me summarize this price rise mechanism by using the concept of the phillips curve ( chart 9 ). the phillips curve depicts the relationship between the output gap and inflation, and illustrates the following mechanism : if economic conditions are favorable and the labor market and the market for goods and services are tight, inflation will rise. in the chart, the vertical axis depicts the inflation rate, while the horizontal axis depicts the output gap. the phillips curve is assumed to be upward - sloping ; that is, if economic conditions improve and we move to the right along the phillips curve, the inflation rate will increase. note that the inflation rate here depicts the year - on - year rate of change in bis central bankers ’ speeches the cpi excluding food and energy, both of which are likely to be affected by changes in the exchange rate of the yen. let us first look back at the situation before the introduction of qqe. the green curve is based on data up to the first half of the 1990s, while the blue curve is based on data since the second half of the 1990s. comparing these two, you can see that the phillips curve shifted downward during the prolonged period of deflation. as a result, the relationship between economic activity and prices had become such that even when the output gap is zero – when the economy is in a normal state – inflation is about 0 percent. under these circumstances, the view that prices will decline or not rise had become firmly entrenched among firms and households. qqe aims at drastically changing this deflationary mindset of firms and households and at raising inflation expectations toward 2 percent. in terms of the phillips curve, this means that the bank aims at shifting the phillips curve upward, slightly above the green curve, so that the relationship between economic activity and prices is such that inflation will be 2 percent when the output gap is zero, that is, when the economy is in a normal state. developments in the past year in light of this aim, how much progress have we made? let us next look at changes since the introduction of qqe. the red circles in the chart illustrate developments over the past year and indicate the following. first, with the economy growing at