russia had hard times owing to the slump in raw material prices in the global market, while east european countries have been impacted by the tightening of funding conditions on a global level. in contrast to many emerging countries, the albanian economy has been sustained by domestic demand, while – although upward – foreign demand in the form of albanian exports has provided a proportionally lower impact over the economic growth. economic activity at home has been almost entirely sustained by domestic financial resources, while foreign financing in the form of credit lines or portfolio investment has been less considerable. operating within all the parameters of financial soundness, the albanian banking system has been dynamic and effective in channelling the savings towards the funding of corporate production or household consumption. this process has been also facilitated by the macroeconomic stability which enabled the fall of risk premiums in economy and helped to gradually extend the investment horizon. these features led the economic activity at home to record adequate growth in the first three quarters of 2008, a period which is covered by statistical data. with regard to the last quarter, indirect data on economic activity – mainly financial ones – suggest a slight slowdown of economic activity, however, remaining within the projections for 2008. manufacturing, where construction continues to share the main weight, provided the main contribution to the increase of turnover indicator in terms of volume. investment in major road infrastructure projects and the recovery of construction permits from the prolonged constraints triggered high growth rates in construction activity during this period. in addition, the sector of services continues to provide the primary contribution to economic growth at home. the positive developments in domestic production have been also evidenced by the increase of economic tendency indicator, derived from the business and consumer opinions, and by the increased number in employed persons. in annual terms, unemployment rate fell by 1. 5 percent to 12. 62 percent, being mainly triggered by the increase in the average number of employed persons in the private agricultural sector. notwithstanding the inflationary pressures of early 2008 – mainly triggered by supply - side shocks – cpi annual inflation was brought back within the bank of albania ’ s target during the second half of 2008. in the second half of the same year annual inflation rates stood close to the central bank ’ s target – 3. 0 and 2. 5 percent, respectively, in both quarters. the performance of the inflation rate in the second half mirrored the global effect of the fall in basic commodity prices ( mainly foodstuff and oil prices ) as well as a more favourable price conjuncture of goods and services in the

ardian fullani : prevent rather than recover greeting speech by mr ardian fullani, governor of the bank of albania, at a technical seminar on surveillance systems to assess and monitor economic and financial stability, tirana, 24 july 2006. * * * honourable participants, i would like to thank you all for your participation in this very important seminar. allow me first to welcome ms. alvarez - plata and mr. kholodilin, two experts representing the distinguished german institute for economic research diw, who will be holding presentations over these two days and discuss the introduction and implementation of early warning systems for the financial markets and the exchange rate stability. over the recent years, the bank of albania has been working closely with prominent international partners, such as the gtz, in various projects, which aim at enhancing and further consolidating the work of the bank in achieving our main objectives. i avail myself of this opportunity to thank prof. bolle, who has been coordinating our cooperation with the gtz and ms. guda, local gtz coordinator, for making this seminar possible, as a series of activities we have been organizing jointly with the gtz. today ’ s seminar focuses on an issue we have already begun working on. last year in april, we organized a regional seminar in tirana with the topic “ stress - testing ”, wherein were discussed the ways of identifying timely the financial system weaknesses, which may jeopardize the maintenance of its stability in case macro and microeconomic conditions are unexpectedly aggravated. today ’ s seminar focuses on similar issues, but it provides more progressive approaches as far as early warning systems are concerned. such approaches and discussions bear a high level of technique, however, allow me to explain briefly and somehow simply the purpose of their implementation. last week, the bank of albania changed its core interest rate. as you may have already been informed of from our statements, the increase in the interest rate came as a consequence of future expectations effect and of a variety of factors which relate to inflation. what is important to the policies we conduct is the anticipation and prevention of destabilizing pressures in advance, rather than their correction after they have already occurred. waiting to take the proper measures after the signals have become a fact may be costly in two aspects. first, the maintenance of stability is not stable, as long as the measures are taken upon the aggravation of the macroeconomic situation. second, post - destabilization measures generally have their effects after