I take this opportunity to point out that the Bank of Albania’s efforts to keep inflation in check and anchor inflationary expectations, as well as its regulatory and supervisory measures to guarantee financial system stability managed to reduce shock-buffering costs and prevented undesirable consequences. Second, as regards the economy’s expected performance in the medium and long run, the conclusion reached after the two-week long consultations was that the Albanian economy is expected to remain in positive territory of economic growth. However, growth rates will clearly depend on the resurgence of the domestic demand, which is suffering from insecurity related to national and international developments. Consumption and investments continue to suffer from added prudence by economic agents, while financial conditions and banking system capacity to credit the economy are improved. Furthermore, higher inflation rates, noted during the first months of 2011, are expected to drop in the upcoming period. This reveals the foreign origin of shocks that have led to increased prices and reflects internal economic and financial conditions as well as our monetary policy. The joint examination of the Albanian economy found that the fiscal and external sectors are the two main ones that would require our attention and our work in the future. The Bank of Albania has long held that public finances’ long-term stability is a precondition for sustainable economic growth. The daily world press illustrates channels through which indicators such as budget deficit and public debt affect financial markets and in turn the real economy.
In addition to these buffers, the government responded swiftly once adverse shocks occurred especially with additional fiscal measures, including, soft loans for farmers and low-income earners and allowing travelling and shopping expenses to be tax deductible temporarily. So, what about 2017—when uncertainty appears to loom even larger than last year especially on the global front? Against the backdrop of improving global economy, risks to global growth continue to run high. The number one risk, in my assessment, is the direction of global trade and investments after the U.S. Presidential election. Yet there are others that cannot be ignored. These include China’s highly leveraged corporate debt problem and financial stability concerns, political developments in Europe, the deep-rooted problems in the European banking sector, and geopolitical risks in Northeast Asia and the South China Sea. All these factors could result in significant financial market volatility and easily derail the global economic recovery. Even so, I believe the Thai economy and the Thai financial system will remain resilient to withstand these challenges. As you have seen, the impacts of adverse external shocks on Thai financial markets have so far been limited, unlike many emerging market economies, thanks to our robust external position. We have international reserves greater than three times of short-term external debt. Compared with more than 30 percent on average in emerging markets in this region, foreign ownership of Thailand’s public sector bonds amounts to less than 9 percent1. Thailand is, therefore, relatively less prone to capital flight, should foreign investors change their sentiments and expectations.