Nevertheless, as it is concluded through the pages of our Annual Report, the Albanian economy was highly resilient against this shock. Our economy has: maintained the positive growth trend; recorded one of the lowest inflation rates across the region and Europe; further consolidated the indicators of fiscal stability and external position of the country. In addition, the Albanian economy has preserved the overall soundness of the private sector's financial balance sheets. In more concrete terms, the Albanian economy - despite facing more expensive imports and tighter financial conditions – expanded by 4.8% in 2022. Economic growth showed a good sectoral allocation and was underpinned by the increase in household consumption, business investments and in exports. On the other hand, the higher demand for goods and services in 2022 was reflected in notable improvements in labour market. Hence, employment grew by 4.2%, unemployment rate declined to the historically minimum level of 10.8%, while average wage in private rose by 12.2%. These developments supported the growth in the Albanian households' income, by  1/5  BIS - Central bankers' speeches  offsetting the increase in the cost of living for most of them. However, the observed shortages in the labour market are turning into an increasingly large obstacle to the expansion of activity and are fuelling domestic inflationary pressures. In line with these developments, consumer prices have risen sharply in 2022, recording an average inflation rate of 6.7%.
On a more general view, the first effects of our reaction are evident in curbing the increase of inflation and settling it on a declining trajectory. Our assessments show that in the absence of this reaction, inflation would have averaged 4.5 percentage points higher throughout the 2022 – 2024 horizon, having significant negative consequences on both the purchasing power of households and non-performing loans ratio. At the same time, our activity in the field of supervision, regulation and licensing of the banking sector, in 2022, focused on three main directions: (i) guaranteeing the soundness of the banking sector, in presence of real and financial shocks triggered by the war in Ukraine; (ii) monitoring the impact that the upward trend of interest rates had on the balance sheets of the banking sector; and, (iii) dealing with the intense and  3/5  BIS - Central bankers' speeches  organised cyber-attacks on the country's financial industry and infrastructure. The results of our work in these directions have been positive, helping the banking sector to successfully tackle the challenges of 2022. In parallel with them, we have aimed to further improve our regulatory base and our macroprudential policies and instruments, to further strengthen banking supervision, as well as to promote the development of the payment system, through upgrading the legal, regulatory and infrastructural base. In more concrete terms: First, the Bank of Albania has continued to complete and improve the supervisory regulatory framework, aiming at its approximation with the EU acquis and Basel Committee principles.