PRESS CONFERENCE
Speech by the Governor of the Bank of Albania, Mr. Ardian Fullani, at the joint press conference with IMF Mission and the Ministry of Finance, 14 July 2010

Dear print and visual media representatives,

The visit of the International Monetary Fund Mission was characterised by fruitful and intensive discussions. They focused on the recent economic developments at home, their perspective in the near and distant future and the role of structural and macroeconomic policies to encouraging and ensuring the sustainable development of the country.

At the end of these discussions, we conclude that we share a common opinion on the role and importance of prudent policies, which should have at their heart the maintenance of the underlying economic balances, as an essential precondition for the stable and long-term growth.

Likely positive is the fact that the principal decision-making institutions remain committed to take concrete and timely steps to ensure this development.

The Bank of Albania has already adopted this position with transparency, as guidance to its decision-making process in the area of monetary policy and banking supervision. Its explanation has made up the essence of our communication with the other players of the economy and the public at large.

Let me now touch on the issues discussed during these days and summarise the opinion of the Bank of Albania in this regard.

The economic developments of the recent months offer encouraging signals, but they also show some weakness of the Albanian economy and the trade-offs that policy-makers should acknowledge to accomplish their targets.

The Albanian economy performed in line with our projections in the first half of 2010, being characterised by a positive, but slow, growth of the economic activity.

This growth is considerably grounded on the quick increase in exports as a reflection of the recovery of the world economy, the more competitive position of the exchange rate, and the efforts of businesses and industries operating in this sector to find new markets and use their competitive advantages.

On the other hand, domestic demand slowed down, mainly reflecting the still high uncertainty and the difficulties in financing the economic activity. As regards to the underlying balances of the economy, this period has been followed by controlled and downward inflationary pressures, as well as correcting trends in the external position of the country.

The economy's financial soundness has improved, confidence in the banking system has recovered and the risk premium has been declining. These general trends are expected to persist in the period ahead.

Economic developments during the first half of the year have called for the need to review the fiscal policies and projections for the rest of the year. The realization pace of public revenues and the need to preserve the fiscal sustainability and public confidence called for measures that guarantee the control of budget deficit and public debt.

Making continuous calls for measures, the Bank of Albania considers the envisaged fiscal measures in the revised budget as the right step in this regard.

The realistic management of the fiscal situation and the adoption of a prudence-type philosophy in the 2010 budget implementation are necessary to guarantee long-term fiscal sustainability and strengthen macroeconomic balances.

Among others, a lower pressure of the public sector on the domestic money markets enables more adequate conditions for the private sector lending through the reduction in the risk premium and the control of long-term interest rates.

Bank of Albania remains willing to further support these developments with other monetary policy steps that will aim at the transmission of a prudent monetary stimulus to the economy. In parallel, we will make due efforts for the banking system to transmit this incentive timely and successfully, thus augmenting the lending to the private sector.

Finally, allow me to emphasise that the current situation and the future developments are expected to remain positive, but they however call for due attention in order to avoid the possible risks that may hit the economic stability and threaten the long-term growth potential.

 Albania's external position will particularly remain the focus of our attention. In the short-term, it measures and conditions the economic incentives that may be successfully absorbed by the Albanian economy. In the long-term, we reiterate our call that the encouragement of foreign direct investments or the other forms of long-term capital inflows is the right way for the long-term development of the country. Along with domestic structural reforms, public authorities should pay an increasing attention to this objective in order to release the development potential of the Albanian economy.