In 2022, inflation rose initially on the back of the rapid surge in prices of import items, in addition to an ever increasingly strong aggregate demand and an overall upswing in costs of production. However, inflation trend recorded a turning point in October 2022, declining progressively onwards at 4.7% in May 2023. This performance reflected the dynamics of prices in global markets, the first effects of our monetary policy's reaction, - which I will elaborate on in more detail below, - and the appreciation of the exchange rate. Also, the relatively low inflation rate in Albania was also backed by the contained electricity prices for households and some businesses, thus transferring the increased cost in energy imports to the public sector's balance sheets. Year 2022 marked progress in terms of improving the external position of Albania as well. More specifically, the Albanian exports grew by 42% over the past year, driven by the rapid growth in tourism income. This growth led to the reduction in both the trade deficit and the current account deficit. In parallel, external debt of Albania declined while its sustainability indicators improved. The improvement in the balance of external trade, the high levels of foreign direct investments coupled with the stability of the domestic financial markets, drove to the strengthening of the lek exchange rate during the past year. These trends seem to have continued in 2023 as well.
However, in parallel with them, it also reflects the appropriate reaction of monetary, financial and fiscal policies, as well as the fruits of the continuous structural reforms that we have undertaken in the real and financial sector of the economy. 2/5  BIS - Central bankers' speeches  In this context, allow me to elaborate on the main directions and results of the work of the Bank of Albania throughout 2022. The augmented intensity and the expanded base of inflationary pressures during the past year dictated a change in the monetary policy stance. In fulfilment of our legal mandate of price stability, the Bank of Albania undertook a normalization of the monetary policy stance. The rise in the interest rate to 2.75% as at end of 2022 from 0.5% at the beginning of 2022, led to the realisation of this normalisation. In parallel, we have intensified communication with markets and public, re-affirming our will to take all the necessary measures for inflation return to the target and to clarify our monetary policy strategy. This strategy is based on three important principles: First, the normalisation of monetary policy stance was and remains necessary for inflation to return to the target in a steady manner. The purpose of this normalisation was to curb the pass-through of rising international prices to the overall and steady surge in prices in the Albanian economy. In this context, it remains in line with the reaction of the other central banks.