The Bank of Albania deems that though the cautious consumer behaviour has not made any direct impact on economic growth over this period, it has helped keep risk premia on track and has led to low long-term interest rates, thus contributing to boosting private investments. Looking forward, we deem that the fiscal policy should retain its orientation toward fiscal indicators sustainability, supporting Albania’s economic and monetary stability and being an important pre-requisite for a stable and long-term growth. BIS central bankers’ speeches  1  Foreign demand continued to support the growth of exports and economic activity throughout 2012. Trade deficit narrowed by 7.9% in the third quarter, reflecting mainly the good performance of exports. The latter increased by 17% in the third quarter, retaining the previous quarters’ positive trend. On the other hand, imports performed poorly, reflecting the low demand for consumption and investment. In the third quarter, imports recorded positive annual growth of only 0.7%. Performance of monetary indicators attests to moderate pressures on monetary inflation. The annualised broad money growth rate decelerated to 6.8% in September. Reflecting the sluggish domestic demand, economic agents’ demand for money has been low. The weak demand for money has been associated with a constantly falling contribution of funding from public and private sectors to increasing the monetary supply throughout 2012. Private sector’s contribution continued to slow during this month; its annual growth rate reached 4.2%, recording one of the lowest historical levels.
On the other hand, preliminary information suggests that the fiscal stimulus may be upward in the next year, complementing the foreign demand as a short-term contributor to next year’s economic growth. However, the overall effect of fiscal stimulus will depend on the response by the private sector and financial markets. At the same time, its long-term effect will depend on additional costs that it will bring about on the budget. The Bank of Albania deems that the aggregate demand will not exert upward pressures on inflation. Against the backdrop of a stable monetary environment, well-anchored inflation expectations and moderate impact from import prices and exchange rate, inflation is expected to remain within the Bank of Albania’s target over the period ahead. Under these circumstances, our monetary policy is expected to retain its stimulating nature in the medium term. *** Concluding the discussions, the Supervisory Council decided to keep the key interest rate unchanged, at 4.0%. 2  BIS central bankers’ speeches