Preparing a plan for reducing euroisation in our economy is a joint commitment by a number of authorities and the Bank of Albania is in the process of identifying measures that may be taken in this regard. Amid a complex and challenging economic and financial environment, the coordination of the monetary, micro and macro-prudential policies assumes primary importance in promoting monetary and financial stability. In 2016, the Bank of Albania has worked with the same intensity in all three aspects, aiming at an optimum calibration for them. Following, is an overview of our work for maintaining and promoting financial stability. 3. Promoting financial stability and sound lending In accordance with its mandate and institutional responsibilities, the Bank of Albania is jointly responsible for safeguarding financial stability in Albania. It communicates its assessment on the financial stability regularly, and coordinates its policies with other institutions, through the Financial Stability Advisory Group (FSAG). With regard to financial stability, during 2016, we continued to work for drafting a comprehensive framework of the macro-prudential policy and constructing macro-prudential instruments. This framework is based on recommendations of the European Systemic Risk Board and standards of the Financial Stability Board. Moreover, in accordance with its institutional mandate and responsibilities, the Bank of Albania is tasked with safeguarding the stability of the banking system and addressing potential risks that may jeopardise it.
Output and demand are posting moderate annual growth rates, but still with some improvement over the second half of last year. This is good news. However, marginal data show some loss of strength which, combined with low confidence indicators for firms and households, leads us to estimate that the recovery foreseen for the second half of this year will proceed at a slower pace. Accordingly, we have adjusted our growth forecast for this year downward, by one fourth of a point. Inflation has moderated but is still high and thus it is our main worry. In our baseline scenario, we have it around 4 percent for some months to later descend toward our 3 percent target. About the risks facing financial stability, the Report shows no big changes either. Corporate borrowing continued to rise in the past few quarters. Although there are obvious factors behind this trend, such as increased external borrowing-a logical development given the good credit conditions-and the depreciation of the peso, we must not relent in our efforts to closely monitor these tendencies. Anyway, figures also show that the households’ and firms’ financial burden has not increased, largely because interest rates are low, in line with our clearly expansionary monetary policy. The external scenario has also behaved as we outlined in March. The recovery of developed economies looks more balanced across countries, boosting confidence in consolidated growth of the developed world. Emerging markets continue to show some further weakening, especially in our region.