ardian fullani : overview of albania ’ s latest economic and financial developments speech by mr ardian fullani, governor of the bank of albania, on the monetary policy decision - making of the bank of albania ’ s supervisory council, tirana, 30 april 2013. * * * today, on 30 april 2013, the supervisory council of the bank of albania reviewed and approved the quarterly monetary policy report. based on the most recent monetary and economic developments in albania, and following the discussions on their outlook, the supervisory council of the bank of albania decided to keep the key interest rate unchanged, at 3. 75 %. the supervisory council deems that the current monetary conditions are adequate to meet bank of albania's inflation target in the medium term. the present interest rates and liquidity situation in the economy provide simultaneously the necessary monetary stimulus to boost domestic demand. let me now proceed with an overview of the economic developments and key issues discussed at today ’ s meeting. * * * according to instat data, economic activity in albania increased 1. 6 % in 2012. the albanian economy showed signs of weakness during the past year, reflecting an overall uncertainty in the internal and external environment. nonetheless, against the backdrop of unfavourable developments, the main indicators of domestic and external balances remained within healthy parameters. during this period, inflation ranged within the bank of albania target band and indicators of banking system soundness improved. maintaining these balances provides the right macroeconomic premises for sustainable and long - term growth. referring back to the performance of inflation, instat data reveal that consumer prices rose on average 2. 5 % in the first quarter of 2013. inflation continues to be determined by food prices ; their contribution accounts for about 90 % of headline inflation. moreover, food inflation was offset by the lower inflation of non - food consumer goods. inflation of this category reflected the downward oil price, following its decline in international markets. also, the price fall of long - term consumer goods provided downward effects, whereas prices of other consumer goods did not change significantly. from the macroeconomic perspective, inflation continues to reflect the weak pressures from the aggregate demand - side and the absence of supply - side shocks. below - potential growth of aggregate demand leads to underutilisation of production capacities and generates weak pressures on increasing wages, producer prices and profit margins. under these circumstances, internal pressures on consumer prices appear weak, as reflected by the low core inflation. on the other hand, imported inflation was subdued due to

##lity around the world. notwithstanding the turbulence of the global economy, asian economies had proven to be resilient in the face of negative external developments, with favourable macroeconomic performance and well - maintained stability during the past period, thanks to the region ’ s flexible policy framework, robust financial system, and improved risk management as lessons had been learned from the crisis of 1997. making headway towards sustainable growth ladies and gentlemen, the success of asian economies in weathering the global financial crisis is certainly commendable. but it would be a mistake to be lulled into complacency by this success of short - term volatility management. in particular, there remain important long - term challenges to the sustainability of growth in asia. indeed, latest economic indicators already pointed to a bis central bankers ’ speeches less upbeat growth trajectory of the asian region including china. the apparent slowdown in asia, despite gradual improvement of the advanced economies, lends support to the idea that asia also has its own structural bottleneck issues to deal with. the time is ripe for all parties involved to look beyond short - term fluctuations and give serious consideration to longer - term structural issues that are holding back asian potential growth. this is the second topic of my talk today : what can asia do to sustain its high pace of growth in the post - crisis world? since the onset of the global financial crisis, most policy responses in emerging markets have been focused on demand - side management, through monetary or fiscal policy stimulus. but boosting demand alone could only get us thus far. the real lift of potential growth of the economy must essentially come from supply - side progress. this refers to either the more abundance or the better use of capital and labor inputs in the economy. although asia ’ s potential growth remains higher than in other regions, recent studies pointed to a possible reduction in trend growth since the 2008 financial crisis. 1 in my reading of anecdotal evidence and through policy discussions, two common drags to long - term growth among emerging asia are the labor shortage and the decline in productivity growth. let me explain the labor market issue using the case of thailand as an example. the problem of labor shortage has been deep rooted in thailand for many years but has not received much attention until recently. this could be partly due to favorable economic expansion during the past years that has masked this problem and also because of the ability on the part of firms to employ immigrant workers. but now with protracted external demand slowdown coinci