foreign trade data point to our exports annual growth by 20. 7 % in december. on the other hand, imports accelerated their growth rates in this month, posting an annual growth of 14. 5 %. this performance is reflected in the widening of the trade deficit by 12. 0 %, year on year. to a large degree, the trade deficit reflects price developments in international markets. in real terms, the trade deficit is assessed to have narrowed during 2011. indirect data show that consumption was poor over the second half of 2011. in the fourth quarter, however, it showed improvement. indirect data obtained from the import of consumer goods, fiscal indicators and consumer confidence indices signal the recovery of consumption during this period. on the other hand, the presence of uncertainties for the future amongst albanian consumers continues to discourage consumption and dictate the consumer ’ s behaviour towards saving. bis central bankers ’ speeches private investment is assessed as improved in the fourth quarter for certain branches of the economy, while across the sectors of the economy the improvement remains low. furthermore, below potential growth and low capacity utilisation rates have reduced incentives to undertake new investments. the contribution of fiscal expenditures to aggregate demand growth has been positive over 2011, reflecting a moderate fiscal stimulus, especially during the first and fourth quarters of the year. the fiscal policy has been prudent with a view to keeping fiscal indicators within sound parameters. budget deficit for 2011 was all 45. 7 billion, remaining within the envisaged level. its performance has reflected low rates, both in terms of fiscal income and expenditures, recording an annual growth of 1. 8 % and 3. 7 %, respectively, in 2011. monetary indicators performance suggests the existence of contained monetary inflationary pressures. the annual growth rate of m3 monetary aggregate was 9. 2 % in december, in line with the deceleration over the second half of 2011. according to our analysis, the expansion of money is in conformity with the demand for real money in the economy. the expansion of money has been sustained by the increased demand of the public sector for funds at end - 2011, as well as the stable contribution of the demand by the private sector. the latter continues to reflect developments in the real economy, being conditioned mainly by weak demand for loans by businesses and households. in december, the loan portfolio of the banking system to the private sector was 10. 4 % higher than a year earlier. similar to the most part of 2011, it has reflected the demand of the

solution to this problem is a priority in the verge of increasing global demand and energy prices. speeding up the privatization process of the remaining state assets is another important step forward. special attention should be paid to structural reforms, particularly property rights and legal framework. in our opinion services, construction and in particular agriculture will remain driving forces of the gdp growth in the coming years. therefore i would strongly agree with any initiative that encourages fdi ’ s in these sectors through attractive laws and other measures. i believe fdi ’ s are very important for providing long term stability of the foreign sector. moreover the productivity growth that usually follows fdi ’ s inflows will play e significant role in reducing current account deficit. our economy needs more foreign direct investments hence country credit ratings constitute a chief priority for our economy. it is my belief that fdi ’ s represent a regional rather than an individual challenge for the south east europe. countries in the region must coordinate their efforts toward creating a regional market. regional infrastructure projects will significantly increase attractiveness and competitiveness as well as international financial market awareness toward our region. it will improve confidence and provide necessary economic incentives to enter in the region leading to higher fdi ’ s inflows for each economy. inflation our economy has experienced a relatively long period of stable prices. annual inflation figure as measured by the consumer price index, for the last 12 months is reported at 2. 4 percent. both monetary and fiscal policies have been important factors in keeping inflation low. however, recently inflation pressures have accelerated. the fast growth of credit to economy, the steep increase of oil prices, administrative increase of energy prices, as well as other risks have the potential to create inflationary pressures and pose risk to elevate inflation expectations. bank of albania will take all necessary actions to ensure an inflation rate of 3 per cent with a tolerance band of ± 1 percent, in the short and long run. interest rates during the recent years interest rates have dropped reflecting the ease of monetary policy. this has been a general trend for all financial assets either in lek or foreign currency. on average banking system applies 9. 7 percent for loans in domestic currency. the yield of 12 month government securities dropped at a minimum of 5. 74 percent in june 2006. however, following the last decision of the bank of albania and latest trends in global markets, a modest increase in interest rates has been observed during the last three months for both domestic and foreign financial instruments. we expect this trend to persist within