Ardian Fullani: Recent economic and monetary developments in Albania Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the press conference on the Monetary Policy Decision of the Bank of Albania Supervisory Council, Tirana, 29 May 2012. *  *  *  Today, on 29 May 2012, the Supervisory Council of the Bank of Albania reviewed and approved the monthly Monetary Policy Report. Based on the analysis of Albania’s latest economic and monetary developments, and following discussions on their performance outlook, the Supervisory Council of the Bank of Albania decided to keep the key interest rate unchanged at 4.25%. This decision reflects the Supervisory Council’s opinion that the actual monetary conditions are adequate to meet the Bank of Albania’s inflation target in the medium run. It holds the key interest rate at a record low, thereby maintaining the strong stimulating nature of monetary policy, in order to boost aggregate demand and economic growth. This decision also reflects the heightened uncertainty deriving from the external economic environment and, particularly, from the recent economic developments in Greece. Let me now proceed with an overview of the economic developments and key topics discussed at today’s meeting. *** Annual inflation marked 1.6% in April, continuing to pursue an upward trajectory over the last two months and approaching the lower limit of the target band. After marking a minimum low in February, the rising trend of inflation was expected and communicated by the Bank of Albania.
After recovering in the last quarter of 2011, private consumption slowed down in the first quarter of 2012. The performance of imports of consumer goods and the low annual growth of VAT revenues suggest sluggish consumer demand over the quarter under review. This assessment is also supported by qualitative data obtained from consumer, business and banking sector surveys. The dynamic of quantitative and qualitative indicators also suggests a sluggish performance of investment. BIS central bankers’ speeches  1  Against a background of low demand and spare production capacities, and in the presence of uncertainties for the developments at home and abroad, businesses have postponed their new investment-related decisions. In addition, the contribution of public investment to aggregate demand growth was negative in the first quarter of 2012. The Government pursued a prudent fiscal policy in the first four months of the present year, translated into the annual reduction of the budget deficit by 28% during this period. Budget revenues continue to record moderate annual growth rates, reflecting the performance of economic activity and providing evidence for the mutual impact between the public and private sector dynamics. The Bank of Albania, however, points out that pursuing a fiscal policy oriented toward the long-term sustainability of budget and public debt figures will provide clear medium- and long-term benefits to the Albanian economy, in the form of lower risk premiums, greater room for private sector financing and, ultimately, lower financing costs. This policy is also in line with the developments in domestic and foreign financial markets.