ardian fullani : the current performance and development prospects of the albanian economy speech by mr ardian fullani, governor of the bank of albania, at the bank of albania ’ s forum with representatives of main businesses operating in albania, tirana, 23 november 2009. * * * dear ladies and gentlemen, it is my pleasure to be among you today, to share with you our views on the current performance and development prospects of the albanian economy. as the most dynamic part of the albanian economy, your contribution has been tangible in the country ’ s economic development during transition. your incentive, your willingness and devotion have brought about tangible results in the country ’ s development. in a single figure, the albanian economy performance may be summarized in the growth of above 65 percent of gross domestic product and well - being per citizen during these years of transition. our development prospect remains as much positive. the country ’ s macroeconomic stability, the continuation and deepening of structural reforms as well as the geopolitical reality of approximation to developed economies of the european union, would help in a fuller release and remuneration of your potential and energies. today ’ s forum aims to highlight the economic development of the country and initiate a broad public discussion on alternatives of the future economic growth models. now, let me start by making a brief statement of the latest developments of the albanian economy, and further dwell upon our viewpoints on the country ’ s economic development in the future. economy performance during the crisis the developments over 2009 have indicated that the albanian economy has been impacted by the recent global crisis, mainly as a consequence of decreased foreign demand and remittances, higher risk premiums, reduced and high - cost financing resources. however, our economy continued to record positive economic growth rate during this period, while the domestic inflationary pressures remain subdued. the country ’ s economic activity has been sustained by the fiscal stimulus and the preservation of steady consumer demand, while investments and exports have recorded lower growth rate in the first nine - month period of the year. the economic performance over the first 9 - month period of the year, albeit positive, attests to growth rate slowdown, reflected even in the gradual slackening of inflationary pressures. in spite of a slight improvement during 2009, the current - account deficit remains high, reflecting high levels of consumption in the albanian economy and unfeasibility of production capacities to meet it. the fiscal policy has had an expansionary nature during 2009, reflected mainly in increased budget

, this advice may be reduced into an appeal for a close consultation with the banking system and the financial market ’ s specialized agents. the latest global crisis – in particular in the us and england – showed that the impaired households ’ balances sheets create room for strong economic shocks and condition the country ’ s long term growth. on the other hand, it showed that the countries that succeeded in preserving a clear certificate of consumer ’ s financial soundness, wherein albania is part of, had a more moderate impact and enjoy good premises for a more rapid growth. in a philosophical approach, the key lesson of the market economy is that all consumption must be paid for. there is no free lunch. back to businesses and investment loans, whose portfolio is 2 / 3 of the total banking system credit, my message is the same in principle : expand the time span of your decision - making and foreign investment and base them on detailed and scrutinized business plans ’ analysis. what i would like to underline is that this message should be perceived by you urgently, since you have the necessary financial and human resources to be more prudent in borrowing and investments. time is ripe for the albanian businesses to avoid the group behaviour, where one business idea is almost automatically followed and adopted by other businesses, without first studying the market size, the competitive advantages, the level of expertise or the financial efficiency of using the funds, according to all the chains a careful and prudent decision - making should go through. the latest tendency for diversifying the albanian businesses is useful in principle ; however, it should not be made to the detriment of specialization and efficiency, or even less without first making the macroeconomic and sectoral analyses. the inter - sectoral performance of the economy is another issue i would like to discuss with you today and which i briefly mentioned earlier in my speech. the country ’ s economic development has been characterized by a growth and investment model which has favoured the services and construction businesses, compared to the exporting industries or the competitive ones in imports. although this performance somehow reflects the tendency to perform similarly to the economic structure of developed and advanced economies, it has resulted in over - investments in certain sectors. the economy development cannot be stable if the allocation of funds is not carried out by adhering to the principle of sector productivity and efficiency. the misuse of financial funds impairs the agents and the whole economy, providing severe and long - term consequences on corporate balances sheets and debts,