The way of using privatization receipts should not only support the short-term economic growth objectives, but should also affect the economic operators’ expectations for stable economic growth in the future. The latter can be achieved by using additional revenues to reduce debt levels and support reforms for structural changes in the economy. Dear participants, Currently, we are of the opinion that the concept of long-term development strategies of a deeply national character is an important issue for the stable long-term growth in our region. Lacking a regional perspective does not favour the individual success of small economies in the global economy. The process of connectivity and integration of transport infrastructure should continue with the integration of development strategies, capital markets, the labour and primary commodities, and energy infrastructure. Our economies are vulnerable and contaminable  2  BIS central bankers’ speeches  from global developments because they are small economies in an economic region fragmented and dependent on foreign inflows in the form of investments, exports and remittances. Increase in the market share, ease in production factors mobility (capital, labour, and raw materials), integration of financial and payment systems, integration and coordination of scientific and educational curricula and addressing of challenges from a regional perspective would make the region an attractive and integrating economic place. This integration would identify the comparative regional advantages, enhancing at the same time the competitiveness of each of our economies.
Furthermore, the Executive Board decided that the key policy rate should lie in the interval 4-5 per cent in the period to the publication of the next Monetary Policy Report on 27 June 2007, conditional on economic developments that are broadly in line with projections. According to the Executive Board’s assessment, the prospects and balance of risks suggest that it would be appropriate to raise the interest rate gradually to about 5 per cent in the course of this year and to a somewhat higher level in the period to summer 2008. Developments in the krone exchange rate will also influence the pace of interest rate hikes because a considerably stronger krone may result in inflation that is too low. Under an inflation targeting regime, it is important to be mindful of the effects of higher interest rates on the krone exchange rate when inflation is low. The interest rate differential against trading partners may widen somewhat further ahead in the projection period. Since such a development is already widely expected in financial markets, we have assumed that it will have limited effects on the krone exchange rate. However, there is considerable uncertainty surrounding the exchange rate projection. The projections are shrouded in uncertainty. The projections for inflation, output, the interest rate and other variables are based on an assessment of the current economic situation and the functioning of the economy. We have illustrated the uncertainty surrounding the projections for the interest rate, inflation and capacity utilisation with fan charts.