ardian fullani : medium and long - term development priorities in albania speech by mr ardian fullani, governor of the bank of albania, at the joint press conference with the ministry of finance and the international monetary fund mission, tirana, 27 september 2013. * * * dear minister of finance, dear mr. ilahi, dear media representatives, the past two weeks have seen very intensive discussions on the current situation of the albanian economy, the state of public finances, the developments in the financial system, as well as on the country ’ s development perspective and management of economic policies, which should support albania ’ s sustainable and long - term growth. as the governor of the bank of albania, i am pleased to see convergence on a common and real diagnosis of the current situation, and also on many viewpoints about medium - term and long - term development priorities. i would like to share with the media several opinions of the central bank on these issues. two days ago, at its monthly meeting on monetary policy, the bank of albania analysed the latest information on current and expected performance of the economy. i made public the conclusions of this analysis at a press conference following the meeting. however, i will telegraphically re - present our main conclusions to put our suggestions for the future into the proper context. the albanian economy is suffering from cyclical weaknesses, which appear in the form of a weak aggregate demand and are reflected in low and below - potential growth of the economy. in simpler terms, consumer spending of albanian households, private sector investments, public spending and external demand for albanian goods and services do not manage to fully use the productive capacities of the economy. the low aggregate demand leads to low increase in employment, wages and production costs, and hence to low inflation rates. also, it poses difficulties for many businesses and is translated into increase in nonperforming loans in the banking system. in this context, undoubtedly, promoting and stimulating the economy should be a priority of the macroeconomic policies. the bank of albania deems that besides the classic instruments of the economic stimulus, monetary and fiscal policies, attention should be paid to smoothing uncertainties in the economy. i will briefly address three of these elements. first, in our opinion, the fiscal policy has limited space for economic stimulus. the rapidly expanding public debt increases the vulnerability of the albanian economy and may make the fiscal stimulus counterproductive. we deem that the fiscal policy should focus on monitoring the public debt in the medium and

contract enforcement. • second, the improvement of by - laws that regulate the collateral enforcement and write - off of bad debt from banks ’ balance sheets. the definitive solution to this problem would signal to the banking system that albania is a country where lending is safe. all these steps would stimulate the economic activity and restore economic equilibrium. however, the albanian economy is also suffering from structural weaknesses, which restrict the growth rate. i would not like to examine this aspect in detail but i think it's reasonable to reiterate my message that albania should speed up structural reform. it should be anchored to the eu convergence process and aim at adopting its best models and rules. through public investment and economic incentives, it should aim at a more effective and competitive economic structure, capable of generating a rapid and sustainable growth. bis central bankers ’ speeches