BANK OF ALBANIA
Speech by Ardian Fullani, Governor of the Bank of Albania, at the Regional Seminar “Development and Implementation of Business and Consumer Confidence Indices in Albania 2”, President Hotel, Tirana, 1 December 2006
Publication date: 01.12.2006
Today's seminar on confidence indices has a special importance as it touches upon the basic elements of assessment and decision-making in economic policies, information and its real dimension. As in any decision-making process, information is the first step to reach a sound judgment on the right monetary policy to be pursued by a central bank.
It is indispensable for the monetary authorities to prepare the analyses of macroeconomic indicators, in order to formulate a monetary policy that ensures the stability of the internal indicators, as well as the relations with the partner economies in trade relationships. On a more general view, the economy of a country cannot achieve competitiveness and international standards, if development policies are built on an incomplete information basis. The preparation of a complete information framework in the economic field is a challenge for the regional countries to reach occidental standards. At the current stage, this challenge is even more urgent for Albania.
The current situation of the national statistics has room for spreading the statistical basis and for providing stable statistics over time. However, the progress in the statistics field, as well as in other related ones, needs time, funds and the right legal ground for undertaking substantial projects. Meanwhile, our decisions have to rely on as much as possible sound basis. The formulation of confidence indices, as indicators of economic expectations, does not substitute the lack of statistical information on the current situation of an economy. These indices enable monetary markets and authorities to rearrange in time the strategies that preserve balances of related goals. Confidence indices enable a central bank to adjust the monetary policy stance timely, in order to preserve price stability, while the economy grows at potential rates.
The developed countries are in frontward regarding the preparation of confidence indices as indicators of expected performance of the economy. Integration of the markets and the globalizing process increase the necessity of preparing these indices in our region, because the objective of monetary policy, the price stability, reflects stability and economic openness towards regional countries and further. It has already been 4 years that the Bank of Albania has started to evaluate business and consumer confidence indices. These surveys are being run on a quarterly basis, with the help of INSTAT, and involve over 600 businesses of production, construction and services sectors and about 1500 consumers. The information collected covers the performance of prices, consumption, income, production, employment, investments and some other indicators, which support the decision-making on the monetary policy stance.
In this important process, the Bank has, from the beginning, been assisted by experts of Ifo Institute for Economic Research, which is internationally known in the field of business confidence indices. So far, the results of these surveys have been indirectly reflected in the periodical analysis and reports and in other different papers of the central bank. The further consolidation of these indicators, paves the way of their publication for the purpose of being used by the economic agents, as an extra way of communicating with the central bank. A preliminary step in this direction is also the consolidation of the applied methodology for calculating these indices, through a professional expertise as that of IFO.
The undertaken steps, in expanding and consolidating the statistical basis of the monetary authority in real time, will enable the timely management of the situations and challenges, brought about by the economic development and the further integration of the regional markets. Coordination of the work between regional central banks for adopting the methodology and the indices enables the maximal use of existing knowledge basis on the specific features of our region, against that of the most developed economies. The use of the same methodology for establishing the indices will make it easier to compare them to each other. In parallel, these indices will serve as a communication tool with the international institutions, specialized in best presenting and identifying the priorities by countries and with the foreign investors interested in our country.
Our purpose is to maximally adapt the indices we are building to the best international practices in this field, far from voluntarily solutions. Without any doubt, the main challenge remains their efficient use in our decision-making process.
We believe that the products we have been discussing during these two days, the confidence indices in general, will be a successful mean of communication for the Bank of Albania with the market's actors and the public at large. I do not hesitate to state that the launch of these two products, especially in the context of our aspiration to adopt the inflation targeting regime, will further improve the decision-making process at the Bank of Albania.
Recently, the Bank of Albania has accelerated the development rates, both in the context of improving the decision-making process and of refining the mechanisms transmitted by its decisions. The issue is how quickly the market's actors will pursue the current rates of the Bank of Albania. It is important that the difference between the two velocities reduces, in order for our dialogue with the market will be standardized and transparent. To enable an as much as possible contemporary communication, among others, our co-operation with the financial market, the Ministry of Finance, INSTAT and other institutions plays an important part. In addition, there should be a close co-operation with other groups of interest, such as the Chamber of Commerce, Konfindustria, the media and the public at large.
At this point, I would like to emphasize that the role the media plays is really exceptional. A professional media would be able to construct reliable and comprehensible communication models, easily understandable by the public.
The products we are getting ready to launch soon, that is, the confidence indices, have to justify their designation. Stated differently, the public should believe the product issued by the Bank of Albania is reliable, that the product is the real object and indicator of public expectations. In the meantime, we expect to have the echo of public's trust back.
Wishing you all a fruitful working-day,