TIRANA, April 26, 2023 – Albania’s currency, the lek (ALL) is seeing unprecedented strength against the common European currency (EUR) this week, part of a trend with all major foreign currencies.
The ALL-EUR exchange rate is closely watched in Albania as the Eurozone is by far the country’s biggest trade partner.
According to the official exchange rate of the Bank of Albania, the euro was traded on Tuesday at 111.34 lek, down 0.47 points compared to Monday and hitting a new historical low.
Since the beginning of the year, the euro has fallen by 2.5 percent, while compared to the same period a year ago, the drop in the euro has reached 7.6 percent.
– What’s behind the trend –
Experts say euro’s weakness in the Albanian market can be attributed to several factors. The high amount of new foreign currency, especially euros, has been a constant feature in the currency market since last year, but in recent weeks, this offer has increased even more.
Experts attribute this to an increase in tourism revenue, the seasonal effect of Easter holidays and an increase in remittances.
One worry is that there is an influx of money from the grey or black economy abroad, with Albanian police at border points regularly reporting catching people with large amounts of undeclared cash trying to enter the country.
– Impact on economy –
The strong lek has had important effects on the economy, including making imports cheaper and reducing the cost of monthly loan payments for foreign currency borrowers.
However, it is becoming an increasingly significant threat to export-oriented businesses, especially those that find it difficult to raise prices to compensate for the loss from the exchange rate. If a subject with income in lek and expenses in euros has gained about 8 percent within a year, for a subject with income in euros and expenses in lek, the effect is reversed and results in a loss.
Furthermore, the euro is the dominant currency in the country’s foreign trade exchanges, and the appreciation of the lek against it has had a significant impact. The strong lek has made imports more affordable. This has helped keep inflation levels relatively low compared to neighboring economies and those of European Union countries.
Typically increased tourism to Albania in the summer would further weaken the euro, but it remains to be seen how these factors will play out in the coming months, and whether the euro will continue to weaken against the Albanian lek.
– Europe on sale for lek earners –
The appreciation of the lek has also had a positive effect on imports of services and especially tourism for people who make their income in lek, making it more affordable for Albanians to travel and vacation abroad.
While the strong lek has had positive effects on certain segments of the economy, it has also posed significant challenges for others. Export-oriented businesses, in particular, are facing difficulties due to the strength of the local currency.
