ENP Newswire -
Release date- 25062014 -
Based on the most recent economic and monetary developments in
Let me now proceed with an overview of the economic developments and key issues discussed at today's meeting.
Annual inflation rate was 1.6% in May, slightly down from the previous month. Inflation fell due to the reduction of health care prices, while prices of other items in the basket recorded low volatility. As with previous months, annual inflation continues to be determined by unprocessed food prices, which contribute around 88% to its final rate.
From the macroeconomic perspective, the performance of consumer prices continues to reflect weak inflationary pressures, both from the domestic economy and the external sector. The negative output gap does not favour an increase in employment and wages, leading thus to a low increase of other production costs. Imported inflationary pressures remain subdued; inflation in
Indirect available data on economic activity signal for positive growth rates in the first months of the year. Aggregate demand improved, driven by both private domestic and foreign demand, while the consolidating fiscal policy pursued during this period did not contribute to an increase in demand.
Incoming data for June have not changed our assessment on the performance of private consumption and investments. While these important components of aggregate demand were upward during the period, their performance remains weak. Their steady recovery continues to be impeded by uncertainties faced by households and businesses and reflected in the greater risk aversion of the real and financial sectors of the economy.
Data on public sector performance show a consolidating fiscal policy over the first five months of the year. This policy materialised in a budget deficit of about 68% lower than the previous year. The tightening fiscal policy is evident both on the revenue and expenditure side. Fiscal revenues increased 9.0% in annual terms, while budget expenditures were 7.5% lower than the previous year. Our monetary policy easing has also taken into account this feature of fiscal policy that the
The improved foreign demand and positive dynamic of some sectors of the economy were reflected in an increase in annual exports by 10.3% in April. The detailed analysis of trade data reveals encouraging signals about re-exporting and agricultural activities. Trade deficit, however, expanded 1.8% in April, due to the simultaneous increase of imports by 6.0%. In particular, the energy situation continues to burden the trade balance of the country due to high levels of energy imports. Structural improvements to the economy and a more favourable external environment would pave the way for a faster growth of Albanian exports.
Projections for low annual inflation rates, against the backdrop of below-potential economic growth, have dictated the pursuit of an easing monetary policy by the
Despite the easing of monetary conditions, the economy's demand for financial assets remains weak. Monetary indicators for April show a slower annual growth of money supply, to 0.7%. Its performance reflects the weak borrowing demand from the public sector and the contraction of credit to the private sector. In April, credit to the private sector was 2.4% lower than in the previous year, continuing to shrink for all but a year. The poor credit performance reflects mainly the contraction of credit to businesses. The analysis of credit demand and supply factors shows that there are uncertainties on both sides, which are materialised in high risk premiums. As we have previously stated, the steady improvement of crediting will follow the improvement of economic activity in the country.
At the end of discussions, the
At the end of discussions, the
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