These  BIS central bankers’ speeches  1  estimations conditioned the retaining of the stimulating nature of monetary policy during the second quarter of 2012. The key rate stood at the lowest historical level, providing eased monetary conditions in order to meet our inflation target and support the Albania’s economic activity. Also, the Bank of Albania has continued to inject sufficient liquidity demanded by the banking system, against an expanded collateral base and at adequate maturity terms. According to recent data from INSTAT, the Albanian economy recorded an annual fall of 0.2% in the first quarter of 2012. Industry contracted 19.3% y-o-y, mainly due to the significant decrease in electrical energy output. Also, Construction decreased its activity in real terms, by 17.6%, thus providing a negative contribution to the performance of the gross domestic product. By contrast, Services contributed positively to the economic activity, pointing to an annual growth of 6.0%. Agricultural sector grew 4.5%, y-o-y during this period, providing a positive contribution to the growth of the gross domestic product. Estimations on the aggregate demand in the first quarter of 2012 suggest a continuing weak domestic demand. The consolidated fiscal policy determined the lack of fiscal stimulus in this period and a downturn in public sector’s demand for goods and services. Private consumption remains slow, thus reflecting the prudent consumer’s behaviour and the increasing tendency for saving. Private investments also remained low.
Given the free production capacity, Albanian businesses found less room to increase their investments in machineries & equipment, and production, while the demand for resident buildings remains weak. At the same time, foreign demand was sluggish in the second quarter of 2012, owing to the problems in euro zone and in our main foreign trade partners. The weak foreign demand, and the problems in electrical energy production, imposed the slow increase of the Albanian exports. Data on economy for the second quarter of 2012 are incomplete. Indirect data signal a weak recovery of the economy in this period. Their analysis supports the estimation for a continuing sluggish aggregate demand, especially of the domestic demand. On the production side, economic sectors are expected to maintain in the second quarter of 2012 the dynamic showed in the first quarter of 2012. Fiscal developments in the second quarter of 2012 were in line with those observed in the first quarter of 2012, characterised by the consolidated fiscal policy and its inclination to maintain budget deficit and public debt targets. This behaviour is reflected in the contraction of budget expenses by 2.5% in the first half of 2012 Furthermore, fiscal revenues increased by 3.7% during this period, continuing to show a slow dynamic of their taxing component. The performance of public expenditure and income in the first half of 2012 is materialised at the significant contraction of budget deficit in annual terms, at 37.7%. This deficit was ALL 16.8 billion in monetary value, and is assessed at 2.6% of GDP.