7  The launch of the new ICO (Official Credit Institute) line of guarantees, recently announced by the Government and worth € billion, will significantly reinforce at a most timely juncture this important instrument for combating the economic effects of the pandemic. Against this backdrop, the findings of the latest Bank Lending Survey anticipate the possibility of a tightening of credit standards for European firms in Q3 this year. Should this be confirmed, prolonged or increased support measures for the financing of firms would be advisable, in order to sustain the recovery. In any event, in this second phase of the economic policy response, credit support mechanisms should focus on prioritising access to these funds for firms with sound viability prospects, with a view to providing for the necessary cross-firm and cross-sector reallocation of productive resources. Likewise, it is admittedly highly likely that a significant number of firms will emerge from this crisis with high debt levels and with diminished demand prospects, at least for some time. In this respect, it is also a pressing concern to review corporate restructuring and insolvency processes, with the aim of establishing pre-emptive, flexible and simplified administrative procedures enabling firms to pursue their business activity while they are still viable. The second decisive contribution of economic policies to alleviating the consequences of the crisis has been the use of furlough arrangements (ERTEs). This has also been a very important instrument for mitigating firms’ liquidity needs.
Deposit to GDP ratio was 64.2% at end-year, higher than its level prior to deposits withdrawal. In addition, the profile of deposit time structure reflected a higher preference for saving, characterised by a shift to longer maturity-term deposits. Easing lending terms during 2010 H2, stimulating measures taken by the Bank of Albania, and decreasing uncertainty and risk premiums were followed by a gradual credit growth. Private sector loan portfolio expanded by 10% in 2010, principally influenced by foreign-currency credit growth. This performance reflects prudential bank policies on loan portfolio quality and economic agents’ moderate demand for loan. In general, lending continues to suffer from lack of demand and realistic, qualitative and valuable business plans for crediting. Restoration of confidence in the financial system, macroeconomic stabilisation, and regulatory and supervisory measures taken by the Bank of Albania led to stabilisation and improvement of banking system capitalisation, liquidity and profitability indicators. 2. Inflation and monetary policy  Annual consumer price inflation was on average 3.6% in 2010, remaining within the Bank of Albania’s targeted band. Inflationary pressures were more concentrated in 2010 H1, mostly triggered by a rise in some administered prices. Average annual inflation in 2010 H1 was 3.9%. In the following two quarters, relative stabilisation of the exchange rate and low inflationary pressures from the domestic demand contributed to the average inflation rate convergence around the Bank of Albania’s target. Negative output gap generated contained inflationary pressures throughout 2010, thus balancing the national currency depreciation effect and the international market price rise.