PRESS RELEASE
Speech of the Governor of the Bank of Albania, Mr. Ardian Fullani, at the presentation of the Bank of Albania’s Annual Report 2009 to the Parliamentary Commission of Economy and Finance, 7 April 2010

Dear Chairman of the Commission,

Dear honourable Members of the Parliamentary Commission of Economy and Finance,

It is a privilege to present to you today the Bank of Albania's Annual Report for 2009. This Report, the key conclusions of which will be briefly reviewed in my speech today, makes a thorough and transparent analysis of economic and financial developments in Albania, and provides an overview of the Bank of Albania's work to meet its legal obligations and institutional commitments.

Dear Chairman of the Commission,

Dear honourable Members of the Parliamentary Commission of Economy and Finance,

Let me begin my presentation by briefly outlining the key topics and messages of the Annual Report.

The year 2009 was a challenging year for the Albanian economy in all its dimensions. In response to the global economic and financial crisis, the following were put to the test during this year:

• The country's macroeconomic balances;
• Our financial system's stability;
• The business models and the private sector's financial sustainability; and
• The analytical and responsive capacities of macroeconomic policies.

In a broader setting, the shock that hit the Albanian economy in 2009 put the flexibility of Albania's economic development model and its capacity to respond to a thoroughly transformed global environment to test.

The global crisis provided a quick impact on the economic activity at home. It was soon followed by the reduction of current and capital account foreign inflows, an abrupt fall of foreign demand and slowdown of domestic demand for goods and services.

In response to these developments, the economic growth rate marked a progressive slowdown during the last year, but still remained positive. Albania's balance of payments was characterized by imbalances in foreign currency inflows and outflows. The imbalances were reflected in the swinging of demand and supply ratios of foreign currency, yielding the depreciation of the exchange rate in response to new balances that dominated the foreign exchange market. Fiscal policy became more expansionary in 2009, supporting economic activity in the country but also increasing the pressures on the financial markets.

The shock that hit the financial system gave rise to the establishment of a challenging environment for the monetary policy to be transmitted completely and timely. Against this challenging background, the Bank of Albania accomplished its legal mandate to maintain price stability in economy successfully: CPI annual inflation remained within our 3 + 1 percent target in 2009.

The Bank of Albania's easing monetary policy established the proper monetary conditions required to maintain price stability. In addition, the supply of the economy with the necessary liquidity and at a declining cost stabilized the financial markets and created the proper conditions for the support of economic activity during 2009.

The performance of the Albanian financial system was affected by the wavering of confidence in our financial system during the first half of the year and the withdrawal of a portion of deposits. This performance, coupled with another group of factors, yielded less support, and at higher cost, to the Albanian economy with banking loans.

Among the factors worth noting are:

• Higher economic agents' uncertainty and liquidity premiums;
• The correction of the business model in particular financial market segments;
• Increased exchange rate volatility; and
• Contracted demand for loans in the second half of 2009.

The wavering of public confidence underscored the prime importance of financial stability in Albania's economic life. Within its area of responsibility, the Bank of Albania undertook a number of comprehensive and co-ordinated measures, which aimed at maintaining financial stability at a systemic and institutional level.

These measures, inter alia, consisted in:

• Reviewing the regulatory base in terms of increasing the supervisory prudence;
• Strengthening on-site supervision;
• Increasing the analysis of banks' balance sheets at an individual and systemic level; and
• Enhancing the co-operation with the national and foreign counterpart institutions.

Our endeavours to preserve financial stability were also coordinated with other public, executive and legislative authorities. Worth noting is the improvement of the public deposit insurance scheme and the increase of the deposit insurance level by the Deposit Insurance Agency. These measures proved successful in curtailing the negative consequences and in fully restoring confidence in the banking system.

Subsequently, the Albanian banking system maintained sound balance sheets and was in full capacity to carry out its function as a financial intermediary and supplier of the economy with payment instruments.

In what follows, I would like to dwell on the aforementioned topics.

1. Bank of Albania's Monetary Policy and Price Stability

(Performance of economic activity, main monetary highlights, monetary policy and achievement of the inflation objective)

In accordance with its legal mandate, the Bank of Albania's monetary policy has been designed and implemented in order to achieve and maintain price stability. During 2009, the main risks to price stability have arisen from the slowdown of economic activity, wavering of economic agents' confidence, imbalanced external position of the Albanian economy and the exchange rate depreciation. Despite these challenges, the Bank of Albania managed to keep the CPI inflation within the target. Let us dwell on these elements further.

1.1 World Economy

The global context that accompanied Albania's economic and financial performance over the past year was not at all favourable. The year 2009 featured contracted global economic activity as a result of the economic downturn in advanced economies and considerable economic slowdown in emerging countries. Global economy posted the first negative growth rate of the last 50 years. Following the problems first shown in 2008, the global financial system went through a difficult period. The attention of regulators and financial institutions focused on fixing the impaired balance sheets of the financial system. The contracted economic activity and the higher uncertainty in financial markets were followed by the reduction of trade and financial flows worldwide. Economic recession also triggered the increase in unemployment and decline in the use of capacities, hence creating a low-inflation environment.

This environment enabled the adoption of strong stimulating fiscal and monetary policies to encourage the growth of demand and production in the economy.

These stimulating policies resulted successful in the majority of countries. Economic activity, the growth of which was mostly negative in the first half of the year, marked a slight improvement in the second half. The recovery in worldwide demand led to the revival of economy and the growth of trade, improvement of confidence indices and formation of more optimistic future expectations. In addition, the decisive intervention of the authorities to support the financial system helped to lower the pressures arising from the crisis. This normalization of the situation was reflected in the reduction of risk premiums, the downward performance of interest rates and in their more moderate fluctuation. However, the recovery of global economic activity remains fragile.

Public debt, which has increased substantially as a result of high fiscal deficits, stands at the forefront of the financial markets and policymakers' agenda. The Governments' capacity to refinance and service this debt in the future will determine the risk premiums in the financial markets and macroeconomic stability in individual countries.

1.2 Economic Growth and Factors Affecting it

The increasing integration of the Albanian economy and the financial system in particular caused the global crisis to be reflected early in our country. The main channels the Albanian economy was exposed to were:

• Decline of exports;
• Decline of remittances and other foreign currency inflows;
• Increased uncertainty in the financial institutions; and, in response to the latter
• Review of almost all economic agents' business plans.

This impact was reflected in low growth rates and shaking of some macroeconomic balances in 2009. In the first nine months, GDP grew 4.9 percent in annual terms. Its annual growth rates were characterized by a progressive decline from 5.4 percent in the first quarter to 4.1 per cent in the third one.

Indirect data and other qualitative information suggest that the economy continued to slow further in the last quarter of 2009. In anticipation of INSTAT's official statistics, preliminary estimates indicate that the economy grew about 3 percent in 2009. The slowdown of GDP growth reflected the contraction of activity in industry and construction, while the services sector's value added remained the key contributor to economic growth.

Given the difficult circumstances in which economic activity took place and compared with other regional countries' experiences, the preservation of the economic growth rate at positive levels is an encouraging development. However, its slowdown and the new macroeconomic balances need due attention by all economic agents in their projections for the future. Albania's economic development outlook also requires greater support from the private sector, while the contribution of the public sector to economic growth is expected to decline.

The data on aggregate demand show that the contraction of private consumption and the fall in investment were determining factors in the slower growth of demand at home. Net exports continued to provide a negative contribution to aggregate demand in 2009, however at more moderate rates than in 2008. In addition to easing monetary conditions, the fiscal stimulus supported the economy in generating positive growth rates during 2009. Private consumption is the key component of aggregate demand accounting for about 80 percent of GDP. The slow growth rates in wages, the decline of remittances and the contraction of consumer loans contributed to the slowdown of consumption in 2009.

Private investments are assessed to have been affected more by the global financial and economic crisis than the other components of aggregate demand. The contracted domestic and foreign demand and the uncertainties regarding the economic situation at home and abroad, and the tight lending conditions triggered the contraction of private investment in 2009.

Fiscal Policy and Fiscal Indicators

The slowdown of Albanian economy affected the performance of fiscal policy and fiscal indicators. Fiscal policy was expansionary being reflected in the deepening of budget deficit particular during the first half of 2009. Budget deficit for 2009 is estimated at about 7 percent of GDP. The main sources of deficit financing were privatization receipts and syndicated loan, which reduced the need to borrow in the domestic market.

Budget revenues posted an annual increase of 2.7 percent, largely due to the slow increase in tax revenue. On the other hand, public spending grew by about 8 percent, led by the high rate of current expenditure.

The expansionary fiscal policy provided the economic activity with the necessary impulse over the course of the year; however it was also accompanied by higher public debt and upward pressures on Government T-bill yields. The deepening of budget deficit resulted in substantial public debt growth, which as at year-end 2009 accounted for about 59.5 percent of GDP. The Bank of Albania considers that it will be challenging to cope with the expansionary fiscal policy in the medium-term and it will likely yield negative consequences in the long run.

In this respect, we encourage measures to reduce the budget deficit and public debt. Lower budget deficit and public debt levels in the long run will provide more room in accessing of funds from the private sector and boost confidence in Albania's macroeconomic stability. In addition, these measures will help to create appropriate conditions for attracting foreign capital in the form of private loans or foreign direct investment.

Monetary Developments and Financial Markets

Financial intermediation in economy was conditioned by the contraction of financial resources, wavering of confidence in financial institutions and the decline of demand for banking loans in 2009. At the end of March, deposits fell to 55 percent of GDP compared to 63 percent in September 2008. The withdrawal of deposits during the first quarter of the year brought about the slowdown of money growth in economy.

Banking activity recovered slowly during the following three quarters. Money supply grew by an average of 6 percent this year or about twice less than the previous year.

The growth of money supply mainly attributes to the growth of its ALL component, while foreign currency loans and deposits contracted in 2009. The creation of money in ALL has been based on the fiscal sector's domestic borrowing and the preservation of the private sector's ALL credit rates.

In addition to the higher banks' sensitivity to their liquidity indicators, private sector credit activity was carried out under the conditions of a more conservative behaviour of banks' lending in 2009. As I mentioned at the beginning of my speech, this conservative behaviour owes also to an increased caution of banks to certain banking products, such as foreign currency loans to certain segments of the economy exposed to exchange rate fluctuations, and consumer loans.

In the second half of the year, demand for loans declined as a result of the tight lending standards and the slowdown of economic activity. Despite the easy monetary policy of the Bank of Albania, private sector credit maintained a uniform slowdown trend during 2009.

As at year-end 2009, credit annual growth rate marked 12 percent versus 33 percent in 2008. The growth of credit has been triggered by the business demand to finance the liquidity needs, while the households' loan portfolio contracted over the same year.

1.3 Balance of Payments and the Exchange Rate

In the presence of slow domestic demand and reflecting the difficult situation of the global economy, current account deficit narrowed by about 3 percent in 2009, standing at 15.3 percent of GDP. Despite the slight correction during the year, current account deficit remains high and one of the weaknesses of the Albanian economy.

As we have constantly stated, the Bank of Albania considers that the prioritized handling of the current account deficit requires the formulation of policies supportive to the long-term growth of savings in Albania, as well as measures to encourage production in those branches or industries that result competitive in the international markets.

Trade balance narrowing was affected by the concurrent annual decline of exports and imports by 18 and 9 percent, respectively. The difficult situation in our neighbouring countries has been also reflected in the decline of remittances, which contracted 6.5 percent in annual terms, while their share to GDP was 9 percent. Capital and financial account surplus reduced substantially over the course of 2009, dropping by 35.6 percent compared to 2008. This performance owes to a large extent to the low increase in foreign direct investment and the reduction of private foreign borrowing.

Unlike the previous two years when capital and financial account covered over 100 percent of the current deficit, in 2009 it financed only 77 percent. Total foreign inflows, albeit downward, were almost sufficient to cover this deficit in 2009. The country's foreign reserve remained at similar levels as in 2008, sufficient to cover 4.2 months of imports of goods and services.

The contraction of foreign inflows exerted depreciation pressure on the exchange rate, particularly in the first half of 2009. In the domestic foreign exchange market, average annual depreciation of ALL against the EUR and the USD was 7.6 and 13.2 percent, respectively. The devaluating tendency of the ALL exchange rate was more moderate in the second half of the year, after a more stable balance between supply and demand for foreign currency had been restored. The rebalancing of supply and demand owes substantially to the trade balance correction and the more moderate psychological effects.

1.4 Inflation and Bank of Albania's Monetary Policy

Performance of CPI Inflation

Consumer prices rose 2.2 percent on average in 2009, which is in line with the Bank of Albania's target for inflation. As a result of the reduced inflationary pressures worldwide, annual inflation marked low rates - 1.8 percent on average - during the first quarter of 2009. In the following two quarters, inflation rates stabilized close to the lower limit of the Bank of Albania's target - 2.0 percent. Annual inflation displayed an upward tendency in the last quarter, when it marked 2.9 per cent in average terms and converging to the inflation target. The highest inflation rate of 3.5 percent was marked in December. The increase of inflation in the last part of the year was mainly triggered by the more complete transmission of the exchange rate devaluation to consumer prices, in the presence of upward raw material prices in the global markets.

The slowdown of economic activity at home and the low inflationary pressures from the global economy created an environment of relatively low inflationary pressures. Core and non-traded inflation marked average rates of 1.3 and 1.6 percent, respectively, in 2009 attesting to the low inflationary pressures on domestic economy. These factors offset the devaluation effect of the national currency, which led to higher prices of imported goods and a part of products that are still indexed to the exchange rate. Traded inflation - a portion of which are imported and the rest are directly affected by global prices - increased substantially compared to the previous two years. Its contribution to headline inflation was about 73 percent in 2009.

Bank of Albania's Monetary Policy

The weakening of economic activity and domestic inflationary pressures, our forecasts for a contained inflation in the future and the anchored expectations of economic agents provided room for pursuing an easy monetary policy in 2009. This policy was materialized in two interest rate cuts by 0.5 percentage points each in January and October 2009 to 5.25 percent, and in the continuous injection of liquidity required by the market and the economy. By means of this prudent monetary policy, the Bank of Albania aimed at creating appropriate monetary conditions for a balanced and long-term development of the country.

The key interest rate cuts were instantly passed through to the short-term interest rates in the interbank market, which declined and were less volatile than in 2008. On the other hand, these movements were not fully and instantly transmitted to the interest rates on banking loans and deposits. As in all other countries, the increase of the liquidity premium, the higher uncertainty and the deterioration of the banking system's financial results were amortization factors for the easy monetary authorities' measures. However, our monetary policy and our interbank market operations managed to successfully avoid a detrimental contraction of banks' balance sheets, something that many emerging countries had to go through.

The 1.00 percentage point cut in 2009 relaxed the financial burden of the banking system's intermediation activity. The Bank of Albania has consistently supported the banking system with the required liquidity. In addition to cutting the key interest rate, the Bank of Albania has helped Albania's banking system activity through: the change of the refinancing auction form from fixed-amount auction to unlimited-amount auction; up to 3-month extension of the maturity term of injected liquidity; expansion of the range of collateral in our refinancing operations; increase of the use of required reserve; and the reduction of the overnight loan interest rate. We have employed almost all of our range of instruments for implementing monetary policy. The amount of liquidity injected by the Bank of Albania peaked in summer with ALL 40 billion. As a result of the deposits entering the banking system, this amount reduced gradually to about ALL 28 billion at the end of 2009.

2. Banking Supervision and Financial Stability

The banking system performance was significantly conditioned by the economic slowdown and wavering of confidence, aspects that were elaborated at length in my speech. Consequently, there was higher uncertainty, higher bank sensitivity to liquidity, a more cautious lending behaviour, and an increase in non-performing loans. These are the main highlights of the banking system performance during 2009. Despite the downward profitability, capitalization indicators remain at satisfactory levels. The banking system remains sound, a fact that also attributes to the effective carrying out of the regulatory and supervisory function of the Bank of Albania. In what follows I would like to elaborate more on these aspects.

2.1 Banking System Performance

The Albanian banking system's total assets increased in 2009, but at a rate about twice lower than in 2008. This decrease reflects fully the lower expansion of lending. Our banking system continues to be mainly financed by public deposits and be concentrated on business lending.

The banking system's deposits and loans grew but at a lower rate than in the previous years. Loans to total deposits increased by nearly 3 percentage points, from 62 to 65 percent. On the other hand, the increase of deposits as a result of the restored public confidence has improved the liquidity situation in the banking system.

Non-performing loans increased in 2009 owing to the economic slowdown and the exchange rate depreciation. Loan portfolio quality index expressed as "non-performing loans to total outstanding loans" rose to 10.48 percent as at end 2009 from 6.64 percent at the end of 2008.

The Bank of Albania has monitored the situation closely being aware of the pro-cyclical effects that these developments may have on the loan portfolio. From our assessments and proactive approach we have noted that although this level of the loan portfolio deterioration was not tested before, capital adequacy and quality, not only to carry out the banking operations but in particular to support the extension and expansion of lending, have remained almost intact. In this context, we can mention the fact that although the loan portfolio did not grow at similar rates as in the previous years, probably due to the large accrual basis but also as a result of banks' reluctance for prudence-related reasons, the growth was satisfactory and at higher levels than in the region.

Based on the periodical stress-tests, the Bank of Albania has managed to make a preliminary assessment of banks' needs for capital, thereby enabling a rapid increase of the capital by banks when necessary. Thus, the increase of non-performing loans was associated with the increase of the banking system's capital.

Total regulatory capital of the banking system increased 37.7 percent, being dominated by the core capital providing evidence for a qualitatively good and sustainable regulatory capital. Despite the difficult economic and financial environment, the adequacy of the regulatory capital to the level of risks, mainly the credit risk, has generally remained satisfactory and the banking system's capitalization level was significantly above the regulatory minimum required by our regulations and international practices.

Efficiency indicator shows almost the same level as at year-end 2008, attesting to prudential and stable growth of banking activity in general. On the other hand, shareholder's equity is estimated to have increased 18.7 percent in 2009 versus 2008. Financial leverage reduced gradually during 2009. The decline of the financial leverage from 11.7 to 10.4 percent over a year implies that the system has relied less on debt to finance assets. Compared with the European Union countries, the Albanian banking system's financial leverage remains low attesting to a low degree of the system's borrowing practice.

The network expansion of banking branches and agencies in the territory of Albania persisted in 2009 however at lower rates compared to the previous years. As at year-end 2009, the total number of branches and agencies amounted to 530 from 517 at the year-end 2008. 17 new bank branches were opened while 4 existing branches/agencies were closed. This fact confirms that banks and branches of foreign banks operating in Albania continued to expand their activity in 2009, being at the same time more cautious in their investments.

2.2 Banking System Supervision

In order to ensure the banking system's stability and exercise its supervisory function, the Bank of Albania has been engaged in a process of a more prudential and deeper analysis and supervision of the legal and regulatory framework compliance and enforcement from the licensed entities. This process has been achieved through on-site inspections, which in 2009 were more frequent and rigorous, particularly in terms of the banking system's needs for liquidity. Besides the observance of the supervisory cycle, banks were constantly contacted for phenomena that have represented a concern during the year, taking appropriate measures to address potential problems in due time. Overall, the banking system has acted with caution in conducting the operational processes of their activities and in compliance with the regulatory framework of the Bank of Albania.

On the other hand, the Bank of Albania has cooperated closely with other supervisory institutions at home, which monitor specific activities of the financial market, namely the Financial Supervisory Authority, the General Directorate for the Prevention of Money Laundering, the Deposit Insurance Agency, the Competition Authority. Cooperation in terms of supervision has been extended to international institutions as well, counterparts of the Bank of Albania. With the initiative of the European Central Bank colleges of supervisors have been established to coordinate the work, exchange of information and joint supervision of large banking and financial European institutions with some supervisory authorities these institutions originate from. In this context, we have become part of the group in some of these colleges, being closer to the monitoring of activities of foreign-owned banks operating in Albania.

2.3 Strengthening of Regulatory and Supervisory Framework

The strengthening of the banking supervision regulatory framework was one of the main priorities of the Bank of Albania in 2009. The design of strong and appropriate rules and their rigorous monitoring constitutes a guarantee for the preservation of financial stability. The Law 'On Banks in the Republic of Albania' and the continuous meeting of medium and long-term objectives of the Bank of Albania consolidated the work for the revision of the supervisory regulatory framework for the compliance with the law provisions, the interweaving with the revised principles of the Basel Committee for an effective supervision and the New Capital Accord concepts, the European Council directives and the best practices in the area of regulation and supervision of financial institutions licensed by the Bank of Albania.

In 2009 the Bank of Albania finalized the drafting of several new regulations and amendments to some other banking supervision regulations. This process has aimed at preceding the prevention of negative phenomena in the system and it has often been triggered by the developments in the global financial markets, particularly the last financial crisis. The main objective remains the adaptation of the best practices in the area of internal control; responsible and effective governance; strengthening of risk management capacities and increase of banks' transparency to the public. With respect to the latter, the Bank of Albania has required higher and improved communication of the banking system with the public about the products and services being provided, the promotional campaigns for new products and the provision of information on their real financial situation and risk profile.

3. Other Bank of Albania Activities

I elaborated at length on the description and analysis of two aspects of the Bank of Albania work: the design and implementation of monetary policy and banking supervision, since these are two key functions of the institution I chair and are rather sensitive for the public. However, allow me to elaborate on some other aspects of the Bank of Albania's work that help to develop the financial system and market economy in Albania. More concretely, I will focus on the performance of the payments system, support of the European integration process; improvement of the Bank of Albania's communication with the public; performance of monetary statistics and the balance of payments; and the enhancement of research capacities.

3.1 Payments System

The payments system reflected security and efficiency in 2009. On average, 225 transactions a day were processed and settled in the AIPS system, with an average daily value of ALL 19 billion. The AIPS is the real time gross settlement system and it is managed by the Bank of Albania. Participants in this system are all licensed banks in Albania. Total liquidities settled in the AIPS system during 2009 is about 4.3 times higher than the GDP. In addition to this system, the Bank of Albania operates the AECH system, which processes and clears low value customers' payments. On average, 413 payments a day were processed in the AECH system, with an average daily value of ALL 62.3 million.

The year 2009 marked the expansion of the range of payment instruments used by the public, reflecting the increase in the use of the banking network by individuals and the higher confidence in the banking system. Debit and credit cards are among the instruments that are being ever-increasingly used in Albania. The number of cards in circulation increased 11 percent in 2009 relative to the year-end 2008. On the other hand, the number of ATMs and POSs for the use of cards has increased by 15 and 48 percent, respectively, versus the end of 2008. However, cash withdrawals from the ATMs account for 96 percent of total transactions, providing evidence for the high use of cash in the Albanian economy.

Developing and maintaining an efficient and safe payments system is one of the Bank of Albania priorities. An effective and developed payments system promotes the well-functioning of the financial markets and strengthens the financial stability at home. In this context, our work in 2009 focused on these main directions: strengthening of the legal framework in view of overseeing the payments systems, and the improvement and encouragement of changes in the national payments system in view of our role as a reformer of the payments system.

With respect to the first objective, the Bank of Albania is very close to finalizing the draft law 'On the Payments Systems in the Republic of Albania', which aims at regulating, overseeing and protecting the payments systems. With respect to the second objective, the Bank of Albania has in co-operation with other entities, realized projects that aim at providing the technical and regulatory infrastructure for setting up payment platforms and projects that aim at reducing the use of cash in economy.

3.2 Promotion of the Integration Process

The Bank of Albania, in the capacity of the central bank in the Republic of Albania, plays a key role in the European integration process. In line with the SAA implementation process, the Bank of Albania has contributed to revising the National Plan for the Implementation of the SAA (NPISAA) for the period 2009-2014, identifying and updating the priorities and measures taken in the areas of macroeconomic stability, free movement of capital, freedom of establishment and freedom to provide services, in addition to the provision of legal initiatives, implementing activities, the required technical assistance and the expected costs during the process of approximation of the national legislation to the acquis communauitare. The Bank of Albania has kept regular contacts with the Ministry of European Integration, submitting monthly progress reports that reflect the achievements in terms of the accomplishment of the legal measures and implementing activities, and a description of the level of compliance of judicial acts approved by the Bank of Albania with the acquis communautaire.

3.3 Public Communication and Institutional Transparency

The Bank of Albania has for many years paid an increasing attention to public communication. This has aimed not only at enhancing public transparency, as an important institutional pillar of the Bank of Albania activity, but also in view of enhancing the efficiency of its operations. In this way, the Bank of Albania acknowledges and addresses the importance of having a well-informed and well-educated public in the transmission of monetary policy to the economy, by taking timely, right and rational decisions.

In this context, our activities in the area of public's financial education have intensified further through the qualitative enhancement and greater geographical coverage. University and high school students and professors were at the focus of our educational trainings and educational activities.

Journalists and the media, being important players in the intermediation of the dialogue between the Bank of Albania and the public at large, have also been at the centre of our educational activities. In addition, our educational publications have increased in number and diversification, hence addressing better to the various stakeholders. Lastly, the redesign of the Bank of Albania website in the beginning of 2009 provides a more efficient portal for the provision of information, making it efficient, re-arranged and user-friendly.

3.4 Improvement of Statistics at the Bank of Albania

The formulation of economic and monetary policies cannot be comprehended without relying on timely and reliable figures and statistics. The Bank of Albania plays a key role in the national statistical system, as an institution responsible for the production and dissemination of monetary statistics and external sector statistics.

In view of carrying out its statistical functions, the Bank of Albania is guided by the basic principles of official statistics in the Republic of Albania, which are: unbiasedness, reliability, professional independence, relevance, cost effectiveness, statistical confidentiality and transparency. In 2009, the Bank of Albania continued to develop and disseminate monetary statistics and external sector statistics, aiming at the improvement of the statistical service. The purpose of this commitment is to approximate the methodology with the recommendations and the best international practices, enhance the quality of data through the improvement and automation of control processes, and increase the number of released indicators and detailing of aggregate indicators.

3.5 Strengthening of Research Capacities at the Bank of Albania

The Bank of Albania has been ever-increasingly paying special attention to enhancing the research capacities in the field of economy and finance, through the strengthening of the human resource capacities, modernization of technical and research infrastructure and the establishment of bridges for the exchange of experience and knowledge with research-engaged institutions and authorities. Some of the main aspects the Bank of Albania's research focused on in 2009 are: forecasts and development of econometric models; the analysis of monetary policy transmission channels; the external sector, financial stability, economic growth etc. The study of different economic phenomena is now based on complete or partial econometric models that allow the drawing of conclusions and reliable forecasts. Our internal challenge in the future will be the further improvement of these models and their growing use in the Bank of Albania decision-making.

***

Dear Chairman of the Commission,

Dear honourable Members of the Parliamentary Commission of Economy and Finance,

In conclusion, I would like to emphasize that the Bank of Albania's financial statements and the balance sheet for 2009 have been submitted according to the legal requirements. The entire financial activity of the Bank of Albania for 2009 has been certified by prominent accounting firms.

Thank you very much for your attention and I am open to any questions, comments or suggestions regarding the activities of the Bank of Albania in 2009 and onwards.