How the Executive Board as a collective views these issues will be made clear in the next Monetary Policy Report published later this month. Introduction A measure of productivity that is often used is production per hour or labour productivity. Unless I say otherwise, it is labour productivity that I am referring to in this speech. How has productivity developed over time? There was a considerable break in the rate of increase of productivity in the mid-1970s. From a rate of increase for the business sector of around 6 per cent a year during the 1960, the trend increase fell to around 2 per cent a year during the second half of the 1970s and in the 1980s. Since then the trend has been rising. In the long run, developments in productivity determine most of a country's GDP growth and prosperity. Another important factor is the development of the labour force and employment. It is therefore important to be able to assess how these will develop in the long run when studying growth and its driving forces. But also in the short term, productivity growth is important, particularly for monetary policy. Productivity affects a large number of other variables in our forecast work, such as employment and inflation. A good example of this is the calculations made with the aid of the Riksbank’s general equilibrium model. They show that the main reason for the low inflation in recent years is precisely the surprisingly high productivity growth.
At the end of 2003 the foreign reserves of BoA reached $ covering 4.7 months of imports. BoA continues to maintain its view of a free exchange rate regime. This was reflected in the fewer episodes of BoA’s intervention in the foreign exchange market during the first half of 2003, when the purchase of foreign currency was almost four times that of the second half of the year. Nonetheless, this did not hold back the domestic currency from appreciating against the euro and the US dollar, with a stronger appreciating trend in place in the second half of the year. The appreciation of the domestic currency was one of the factors behind BoA’s 2.0% interest rate cut during year 2003. Monetary indicators have generally been performed in compliance with the forecasts set out in the Bank’s monetary programme. The annual growth rate of lek deposits was 19.1% by the end of the year, which is significantly higher than the annual rates of the pervious years. The credit balance rose by L11.9bn or 30.9%. The new credit increased by 50% meanwhile 76% is in foreign currency. The loans/GDP ratio is still low, at about 7%. The banking system experienced important developments during 2003 and in the beginning of 2004. The entry of two new banks of Albanian capital was soon followed by the successful privatisation of the Savings Bank from the Raiffeisen Zentralbank (RZB) Austria. Now, all in all there are 16 banks in the Albanian Banking system.