of weak demand - induced inflationary pressures. developments in the real sector of the economy conditioned the controlled price rise of domestic products. these tendencies have been reflected in the downward trend of core inflation and low non - traded inflation of the consumer price index basket. consumer price performance continued to reflect the low pressures from other cost elements. in particular, import prices were low and given the relative exchange - rate stability, they transmitted low pressures from imported inflation. following the economic contraction in the first quarter, albanian economy fell by 2. 0 % y - o - y, in the second quarter. economic activity growth was generated by agriculture, industry sectors and some branches of the services sector, while the construction sector fell sharply. bis central bankers ’ speeches from the viewpoint of aggregate demand, the second quarter ’ s economic growth was mostly supported by the foreign demand, while the domestic demand remained sluggish. consumer spending, though higher than in the first quarter, did not return to past year ’ s rates of increase. this component of the domestic demand remained influenced by the perceived uncertainty, lacked dynamisms in the labour market and slowed available income. confronted with a low ultimate demand for their products and in the presence of spare capacities and relatively tight lending terms, private investments also remained low. in particular, during the first half of the year, the low private investment level reflected households ’ low demand for housing. public spending and fiscal stimulus were also weak, reflecting the consolidating fiscal policy and observing the fiscal restrictions required by law. fiscal consolidation, which is based mostly on reduced expenditure, is illustrated through the downward trend of budget deficit over the period. the budget deficit resulted about all 25. 7 billion during the first three quarters of the year, down by about 19 %, y - o - y. until september, the realised expenditures were about 0. 2 % lower than a year earlier, while the budget income increased 2. 3 %. the data on developments in the external sector of the economy show albania ’ s significantly improved external position. the value of exports increased 6. 7 %, y - o - y, in the first quarter, reflecting the moderation in the foreign demand and performance of global market prices. over the period, imports contracted by 0. 9 %, y - o - y. these developments led to an annual contraction of trade deficit by 5. 4 % until august, positively influencing the aggregate demand growth. also, the sharply decreased current account deficit in the second quarter

ardian fullani : latest economic and financial developments in albania speech by mr ardian fullani, governor of the bank of albania, at the press conference on the monetary policy decision - making of the supervisory council of the bank of albania, tirana, 26 october 2010. * * * at today ’ s meeting of 26 october 2010, the supervisory council of the bank of albania analyzed and approved the monetary policy report for the third quarter of 2010. after scrutinizing the latest economic and financial dynamics at home and the expected performance in the future, the supervisory council of the bank of albania decided to keep the key interest rate unchanged at 5. 00 %. in what follows, i will elaborate upon the analysis and the main conclusions today ’ s decisionmaking of monetary policy was based on. * * * the performance of the albanian economy during the third quarter of 2010 reinforced the main developments in the first half of the present year, featuring gradual recovery of aggregate demand, lower risk premiums and consolidation of macroeconomic stability. broadly in line with our projections : economic growth has accelerated ( resurged ) and its base seems to have broadened ; cpi inflation and expectations have been anchored close to the bank of albania ’ s target for inflation ; the external position of the albanian economy has recovered and the exchange rate is more stable ; liquidity in the system has increased and the interest rates have generally been downward. these highlights reflect, inter alia, the macroeconomic policies pursued over the course of this period. monetary and fiscal policies have, in a concerted manner, aimed at fuelling aggregate demand and economic growth, ensuring at the same time the preservation of macroeconomic balances. july ’ s state budget revision put emphasis on the measures required to be taken in view of maintaining medium and long - term fiscal sustainability, hence implying lower budget deficit and lesser impact of fiscal stimulus on aggregate demand in the short run. this revision paved the way for pursuing an easier monetary policy. the key interest rate lowered by 0. 25 p. p., hence yielding the most stimulating monetary conditions during the last decade. nevertheless, complex challenges remain for the albanian economy and the economic agents. economic growth rate, albeit positive, seems insufficient to yield improvements in the labour market and to lower unemployment. in addition, the sustainability of economic growth remains frail in the short run. its reliance on foreign demand and export growth may be insufficient against a background of a non - consolidated global economic outlook. the waning of fiscal stimulus also