PRESS CONFERENCE
Statement by Mr. Ardian Fullani, Governor of the Bank of Albania, at the Joint Press Conference with the IMF mission

Concluding the intensive negotiations of two past weeks with the IMF mission and the Ministry of Finance, which were finalised with an overall good understanding on the main issues discussed and further to the concluding statement of the IMF Mission and the messages given by the Ministry of Finance, allow me to express some opinions on behalf of the Bank of Albania.

The integral analysis of economic indicators suggests the recovery of economic growth rate close to its potential level. This behaviour has been dictated by the private sector development and has been favoured by the appropriate macroeconomic conditions and macro-finance stability. In this context, rapid credit growth is highlighted as the main source of supporting the economy with funds and as a driver of consumption and investment growth in the country. As an encouraging sign for the future, these developments have not transmitted excessive stresses to inflation or to other economic and financial stability indicators. In particular, we may highlight the positive role played by the monetary policy through raising, in due time and amount, the interest rates, through proper liquidity management and through monetary market development and expansion.

Naturally, these negotiations, being related and affecting directly the economic policies of a country, were oriented to the future. They were (and still are) primarily aimed at undertaking in due time the proper political responses, for further maintaining and strengthening the long-term perspectives of the country's development.

The vision of the Bank of Albania for the future is characterised by positive expectations, though the latest developments have increased the tones of prudence, highlighting the degree of our willingness to take necessary measures for guaranteeing the economic stability and growth in the long run.

The main development factors remain in place even for the future. Private sector's growth, particularly in services sector, and the macroeconomic stability will be fulfilled by further structural and infrastructural reforms, and should be associated by constant efforts for improving the business climate. In the medium run, these incentives should raise the Albanian economy profile, reducing the degree of dependence on imports, absorbing fixed long-term capitals and orienting them to prior sectors of the economy. It is the pleasure of the Bank of Albania to see that the rhetoric frequently used with relation to this program, as a maturity program for the economy and for the Albanian institutions, has been followed by concrete actions in most of involved institutions. The Bank of Albania has taken a number of steps to strengthen the analysing and decision-making capacities in monetary policy, adopting a modern physiognomy in this area, as an institutional guarantee for maintaining inflation within its targeted rate. Together with the incentives taken for the development of the financial market and for the strengthening of its supervisory function, these steps are made concrete in tactile measures for the financial market and the economy.

Extending our tones of prudence mentioned earlier, allow me to refer to some of the main risks identified and to deal briefly with the measures projected by the Bank of Albania.

Concerning the above economic view, we have largely expressed, in the periodic contacts of the Bank of Albania with the public, our concerns about the potential risks that may break the monetary and price stability. Sparing the details, I would mention: the grave financial situation of Electric Energy Corporation of Albania, with its implications for the budget indicators and for the production costs; high level of the domestic demand, which impacts directly on price rise and on trade deficit enlargement; high credit growth paces; constant tightening of monetary policy of the Euro area and its impact on Albanian financial markets; These are essential reasons for re-considering the appropriateness of current monetary conditions in the country, aiming at maintaining inflation within the Bank of Albania targeted band.

Also, the Bank of Albania is paying special attention to the impacts of the above factors, particularly of rapid credit growth, to financial stability of the system. In this context, it is considering the possibility of applying a packet of regulatory measures, based also on the experience of the countries of the region.

Finally, I would like to emphasise that special priority is given to the need for further consolidation of the banking system. During 2006, striking achievements have been made in this regard; however, the qualitative inflows of the previous year should be followed by further processes of mergers and acquisitions, so that the number and quality of participants in the system approaches to contemporary parameters.