The crisis impacted Albania through several channels; it
posed severe challenges and highlighted various previously
overlooked vulnerabilities. Against a backdrop of domestic
imbalances and a difficult external environment, our policy
response was constrained, but ultimately successful. The
economy is on the road to a full recovery, while our main
economic and financial balances are stabilising to healthy
Albania is experiencing an upward trend in its business
cycle. The ongoing recovery is broad-based, with export
expansion and a recovery of private consumption and investments
leading the growth cycle. The increased demand is generating
higher employment, as well as facilitating an overall
improvement of balance sheets across the economy. Our external
position remains resilient, while public debt is under control.
Concurrently, CPI inflation is gradually but steadily returning
to our 3% target, underpinned by labour market improvements and
anchored inflation expectations. Based on current trends, the
Bank of Albania expects both the economy to return to
equilibrium and inflation to return to target within 2018.
This positive outlook reflects the appropriate policy mix we
have pursued. While fiscal policy has engaged on a course of
fiscal consolidation, monetary policy has provided
countercyclical accommodation and our macroprudential
instruments have been geared to enhance financial stability.
This policy mix, alongside its consistent and timely execution,
has proved successful.
The materialisation of our projections is conditional on
continuing the current course of prudent policies. To that
extent, I am encouraged to see our institutional framework is
both politically committed and technically capable to deliver
on this front.
However, I remain firmly convinced our tasks as policy
makers are far from over.
First, we have to raise our long-term growth potential and
boost our resilience to potential shocks. The growth model we
employed during the pre-crisis period, based largely on
debt-financed consumption and investments in non-tradables,
proved to be unsustainable. Countercyclical monetary and fiscal
policies can facilitate, but are not a substitute for,
proactive and committed structural reforms. Hence, an ambitious
economic reform agenda is needed, in order to upgrade our
economy, diversify its structure, and increase its
Second, we have to improve upon the prevailingly weak policy
coordination tools and mechanisms at a supranational level. I
believe the exchange of information and opinions among
international policy makers and regulators should be seen as a
merely necessary rather than a sufficient condition to achieve
Third, we should strive to avoid repeating the mistakes of
the past by learning to incorporate the lessons of the crisis
in our day to day work. As policy makers, I believe we have to
take a holistic approach to economic and financial stability.
We should strive to avoid economic and financial imbalances of
any form; we should strive to preserve a flexible and efficient
economic structure, while also trying to strengthen further
financial safety nets. Furthermore, the policy delivery has to
be proactive and forceful, while our instrument tool-kit has to
be constantly revised and adapted.