ardian fullani : challenges facing the albanian economy and financial sector speech by mr ardian fullani, governor of the bank of albania, at the regional summit of governors and bankers, becici, montenegro, 20 june 2009. * * * distinguished governors, dear participants, i want to start by thanking the organizers of this meeting, for promoting this joint discussion regarding the status of our financial sectors and the measures which are necessary to sustain its resistance to the negative effects of this unprecedented global crisis. indeed, what started as financial crisis in the usa, has transformed itself into an economic crisis, that is having dire consequences in real sectors of the world economy. i will start by describing the main macroeconomic developments of our economy and the characteristics of our financial system, which is similar to other countries in our region. then i will proceed with some of the measures taken by bank of albania, to alleviate the impact of the international financial crisis on our banking sector and the economy. i will finish by mentioning some thoughts on future policies, which i consider important to strengthen the economic environment and the financial stability in our region and in albania. the albanian economy has been growing steadily over the last decade our economy has been in a solid path of growth for the last decade, with an average annual growth rate of around 6 percent. it has benefited from economic reforms that have provided development opportunities for our private business sector, have sustained markets development, have promoted competition, have stimulated flexible labor markets and have increased social revenues. supported by an imf assistance program, both fiscal and monetary policies have been cautious in providing the necessary stimulus to the economic growth, by being consistent and disciplined in the pursuit of their objectives to achieve fiscal consolidation and ensure a low - inflation environment. this steady good economic performance has been supported by a flexible exchange rate that has been instrumental in supporting and maintaining a balanced growth, by maintaining the right incentives for interaction between domestic and foreign counterparties. as in other countries in our region, the banking sector dominates the financial system in albania the assets of the banking sector make around 95 percent of the total financial assets in albania, or around 80 percent of gdp. nowadays, the banking sector counts 16 banks with around 500 branches, all in private hands, where the foreign capital dominates. over time, the sector has increased the number of branches, has improved its products to the public and has increased its intermediating role. at the same time, the entrance of well - known european banking groups from greece, austria

work during the past three years can accurately claim to have been made worse off by international competition. job loss in particular causes significant hardships for affected workers. for example, an analysis by henry farber ( 2003 ), using bls data on workers displaced for any reason, suggests that only about two - thirds of displaced workers found re - employment within three years, with some settling for part - time work. even when successful in finding full - time work, displaced workers experience on average a decline in earnings on the new job of about 8 percent. focusing on workers displaced by trade in particular, kletzer ( 2001 ) found that job losers in industries facing high levels of import competition were slightly less likely to be re - employed and experienced greater earnings losses, at about 13 percent on average, than workers displaced from industries facing less import competition. what can be done to help workers who lose their jobs because of competition from imports? attempts to restrict trade through the imposition of tariffs, quotas, or other trade barriers are not a good solution. such actions may temporarily slow job loss in affected industries. but they do so by imposing on the overall economy costs that typically are many times greater than the benefits. in the short run, the costs of trade barriers include higher prices for consumers and higher costs ( and thus reduced competitiveness ) for u. s. firms. trade barriers typically provoke retaliation from trading partners as well, with potentially large costs for exporters. and history shows that in the longer run, economic isolationism and retreat from international competition lead to bloated, inefficient industries, lower productivity, and lower living standards. the better policy approach is two - pronged. first, at the macro level, policy should be directed at helping to ensure that jobs become available for those who have been displaced. in particular, over time, appropriate monetary policies can help the economy achieve maximum employment with low inflation, irrespective of the trade situation. the nation ’ s trade policies, rather than attempting to restrict trade, should be used to push for even more trade. by opening markets abroad, trade policy provides greater opportunities for u. s. firms and workers. the second piece of a constructive policy toward trade is to help displaced workers train for and find new work. some steps in this direction have been taken. currently, the government ’ s principal program for helping workers displaced by trade is the trade adjustment assistance program, or taa. the congress has recently extended the