It has two functions. First, it expresses in a precise manner the strategy chosen by the Ministry. Second, it is a basis for comparison for the active management of the Fund. The benchmark index is a global securities portfolio, specified down to percentage holdings of individual securities. The equity allocation is probably the most important decision in the composition of the benchmark index. The Petroleum Fund bases its choice on the fact that equities yield a higher expected rate of return than fixed-income investments. Equities account for 40 per cent of the Petroleum Fund’s strategic benchmark portfolio, and fixedincome instruments account for 60 per cent. In 2003, the equity portion of the benchmark consisting of securities listed in Europe was 50 per cent and the remaining 50 per cent in the Americas, Asia and Oceania. The Petroleum Fund’s average ownership in listed companies has increased. At end-2003, the average ownership interest in European companies, where the share is highest, was close to 0.5 per cent. Macroeconomic policy in Norway rests on two pillars; •  The Storting issued formal guidelines to limit over time the annual use of petroleum revenues to the expected real return on the Fund - estimated at 4 per cent annually. That means that the government will not spend the capital itself - but only the return. In that way, the capital is saved for future generations. •  Monetary policy is aimed at ensuring low and stable inflation.
This enabled a fast transmission of monetary policy signals to the interbank and deposit markets. Also, the increase in deficit and public debt was absorbed by the liquidity generated in the domestic financial market. Against the backdrop of a high demand for investment in government securities, their yields dropped significantly for all maturities. All these developments created premises for credit interest rates to decline in 2013. Monetary indicators were largely in line with the real-economy developments. The annual money supply growth slowed down during the year. This slowdown reflected the weak demand for borrowing by the private sector, especially businesses. Lending to the private sector started to contract in the second half of the year. At the end of the year, the loan portfolio stood 1.4% lower than a year earlier. Similar to developments in the other countries in the region, this performance was influenced by economic agents’ reluctance to spend and invest, and banks’ more conservative lending policies. I will dwell on lending issues and measures taken by the Bank of Albania to boost lending in the following. Summing up the performance of the economy for 2013, aggregate demand remained weak and economic growth was low but below potential. This economic slowdown had serious implications for the economy’s health and balances. It affected public finances, which saw increase in budget deficit and public debt. Albanian businesses faced financial constraints and banks’ balance sheets suffered from worsened non-performing loan portfolios. It also led to a higher unemployment rate and slower rise in wages and prices.