suggests that aggregate demand remains sluggish and economic growth below potential. economic activity has been mostly driven by the external demand and a higher fiscal stimulus, while the contribution of consumption and private investment remains low. the latter continue to suffer from the uncertain outlook, the lower increase in disposable income, the spare production capacities, and the relatively tight lending standards. these factors have been reflected in albanian households ’ increasing propensity to save and businesses ’ reluctance to invest. external demand and the favourable weather conditions increased albanian exports by about 34. 6 % in january. in light of the poor consumption and investment levels, which have reflected in the decline of imports by 8. 1 % during this period, this tendency has improved the external position of the albanian economy further. bis central bankers ’ speeches albania ’ s trade deficit shrank 32. 5 % in january. the developments in the external sector of the albanian economy reflected in improved foreign currency demand and supply ratios, contributing, in turn, to a stable exchange rate. the albanian government pursued an accommodating fiscal policy in the first two months of 2013, expressed in the increase of public expenditure and widening budget deficit. budget expenditure increased at an annualised rate of 1. 3 % in january and february. this increase was reflected in both current and capital expenditure. amidst the sluggish economy, budget revenues continued to contract, registering an annualised fall of 0. 8 % over the months under review. this performance of public expenditure and revenues increased the fiscal deficit by about 5. 1 %. reflecting upon the expected economic and financial developments, the bank of albania has been pursuing a stimulating monetary policy. through the constant key rate cuts and liquidity injections into the banking market, the bank of albania has aimed at ensuring more appropriate monetary conditions to meet its inflation target in the medium - term period. the financial market evidences low liquidity and inflation pressures, which, in turn, have enabled the pass - through of monetary easing into the money and primary market. interbank market rates soon reflected the last key interest rate cut and the yields on government debt securities continued to drop. the falling interest rates were mostly reflected in the deposit market rather than in the credit market, signalling a more conservative bank approach to lending and a savings - oriented real sector. monetary indicators have performed in line with the developments in the real economy and the monetary inflationary pressures remain low. money supply decelerated its growth rates further in january to 4. 9 %

indicators point to its lesser impact on economic growth. the government ’ s prudent approach in the first eight months of 2010 in view of meeting the planned deficit figure for 2010 actualized in the annual reduction of public expenditure and budget deficit. the latter amounts to all 23. 2 billion, which is within the projected figure in the budget and about 51 % lower than in 2009. the 2010 state budget revision in july, which established the reduction of expenditure and budget deficit by 10 % and 23 %, respectively, is an expression of the fiscal authority ’ s firm commitment to safeguarding economic stability and ensuring fiscal sustainability in the long run. the high growth rates of exports and the contained performance of imports yielded a positive contribution of foreign demand to economic growth in the second quarter of 2010. foreign trade data on july and august attest to moderate annual growth rates of exports and positive annual growth rates of imports, hence leading to higher trade deficit in this period. the growth of exports in 2010 was fuelled by the recovery of global economy and the favourable conjuncture of prices in the global markets, the depreciation of the exchange rate, the albanian entrepreneurship efforts to expand the market and by some other factors of transitory nature. therefore, promoting exports in a stable and long - term fashion requires undertaking structural reforms, which will in turn enhance the competitiveness of the albanian economy. this would ultimately serve to the transition to a more stable economic growth model and, at the same time, to curbing the reliance on foreign financial sources. our analysis of monetary indicators concludes that the growth of money in economy is concurrent with the economic agents ’ demand for monetary assets, hence creating no room for inflationary pressures in the future. aggregate m3 ’ s average growth was 11. 2 % in july and august, being in line with the nominal economic growth and the enhanced confidence in the banking system. its growth during this period was mainly determined by the increase of the banking system ’ s net foreign assets. private sector credit grew by 9. 8 % y - o - y, close to the previous quarter ’ s rate. although the better liquidity figures and the improved banks ’ balance sheets led to higher banking supply and provided greater room for lending, the latter has progressed at moderate rates. our analyses on lending in economy show that demand remains contracted and the number of worthy projects to lend is still low. the foregoing remains a constant concern for the bank of albania. to this purpose, alongside the banking system, we