the private sector demand had a slow positive performance. consumption and investments were supported by crediting, but their upsurge is conditioned by hesitation to spend. following the revised budget, the fiscal behaviour during the last two months is characterised by lower spending pace and lower budget deficit increase. fiscal stimulus was present in the first quarter, while in the following months the fiscal policy was more contained, which is reflected in lower annual deficit increase. until august, public spending posted annual growth of 5. 2 % in annual terms, while revenues slowed down, growing only by 2. 2 %. budget deficit was all 30. 6 billion as at end - august. foreign demand continues to support albanians economic growth. exports ’ annual growth was 28. 8 % in july. on the other hand, imports continued their downturn trend that had bis central bankers ’ speeches started in the second quarter of the year, increasing by 4. 6 % in annual terms. export uptrend and import slowdown materialised in narrowed trade deficit in july, contracting by 6. 0 % yearon - year. however, the economy ’ s external position remains a structural weakness of the albanian economy, which reflects the need for higher competitiveness of our products in global markets and conditions the effectiveness of stimulating macroeconomic policies. indirect indicators analysis of private consumption reveals its moderate performance. consumption continues to suffer from perceived uncertainty by albanian families, leading to higher saving although aggregate revenues increased. private investment slowed down in this period, but it retained positive growth rates. this is supported by good performance of foreign direct investments, up by 38 % during the second quarter, and higher import of capital goods, which suggest higher private investment in the economy. nonetheless, this hike is conditioned by the fact that many businesses are operating below their production capacities, limiting their needs for new investments. monetary inflationary pressures remain controlled in the medium run. annual growth of money supply, m3, which resulted 11. 2 % in july, retained the average rates recorded last year. money demand was affected by a moderate upward private sector demand for funding. lending to private sector increased by 12. 5 % in july, triggered by the relatively stable increase of lending to private businesses and resurgence of lending to households. although the banking system has eased lending standards, the bank of albania deems that there is still room for further easing, especially as regards credit for private investments. developments in financial markets indicate downward risk premiums and liquidity. in the interbank market, trade volume expanded

by sound and liquid foreign assets. the latter include not only central bank reserves, but also sovereign wealth funds and foreign assets of domestic institutional investors. this has been recently enhanced by access to a usd 24 bn fcl from the imf, membership of the fed ’ s temporary foreign and international monetary authorities ( fima ) repo facility and a swap facility with the people ’ s bank of china. d. policy space is broader, thanks to sound management of fiscal, monetary and financial policy over many years. e. institutions are stronger, including high credibility of the central bank and a stronger social safety net. 14. these favorable factors outweigh some shortcomings, most notably the effect of social unrest in the last quarter of 2019. in fact, in the last three months markets have fully reversed the relative erosion of chilean asset prices at the end of last year. 15. so, how has the central bank used policy space? what challenges have emerged and how are these being resolved? a. the central bank has been largely proactive since november 2019. over the last eight months we have cut the policy rate by 125 bp to its effective zero lower bound at 0. 5 % and have implemented a dozen measures to provide liquidity to markets and to foster lending to firms most affected by the lockdown. b. credit measures amount to some 15 % of gdp, mainly around a medium - term liquidity facility to banks conditional on credit expansion. this provides 4 - year loans at the 0. 5 % policy rate, conditional on growth in corporate and consumer lending, increasingly weighted towards smes. this has provided the liquidity match to a government scheme providing guarantees to working capital lending under favorable financial terms. c. liquidity and other market - stabilizing measures add up to some 7 % of gdp. these include a mediumto long - term asset purchases that also provide unconventional monetary policy tools. page 2 of 3 central bank of chile june 2020 d. the response of bank credit to the central bank ’ s fcic and the government - funded fogape guarantees has been largely positive. corporate lending has been growing at 10 % year - on - year over the last three months, making it the first case of countercyclical lending in recent history. e. in particular, banks have used liquidity to allow the drawdown of credit lines by corporations, 1. 2 million rollover operations and 120, 000 working capital loans with a sme share largely above historical averages. f