Things could further deteriorate for the Albanian lek, experts warn
TIRANA, Jan. 5 – In a perfect storm stemming from the global economic crisis and declining remittances from Albanians abroad, the historically strong Albanian currency, the lek, has entered the New Year in a weakened state that could continue to deteriorate, economic experts say.
The lek has been a strong and stable currency in Albania, even in years of political turmoil that saw neighboring countries fighting hyperinflation, but it now faces a combination of elements that are exerting a lot of pressure, forcing the Albanian lek to loose ground against major currencies like the euro and U.S. dollar in the long run.
Obviously, the global economic crisis and the roller-coaster ride it forced on many currencies is a big part of the story. Some of the lek’s behavior can be tied to the relationship between the euro and the U.S. dollar, which also saw large fluctuations.
But the relationship to the euro is far more important to the Albanian currency at this point since most of Albania’s foreign trade is done with Euro area countries.
Locally, this week, the exchange rates hovered around 135 leks for one euro making euros more expensive than last year. One dollar sold for about 93 leks, a weaker spot in the short-term for the American currency, which is being devalued worldwide.
And there is a declining trend, at least in the past couple of years for the lek against both these currencies. At the same time last year one euro was exchanged with 122.8 leks and the dollar for 87.7 leks.
Two years ago, in January 2008, the dollar was worth 82.5 leks, while the euro 122 leks.
One of the trends in Albania has been that the lek becomes stronger when there is an influx of visitors, like the winter holidays when many immigrants return home to celebrate with their families.
That wasn’t the case this year due to lower rates of consumption associated with the weak state of the host economies where Albanians abroad make a living. There was less foreign currency coming in, so the lek stayed down.
While the lek gained some ground in the short-term, in terms of comparing to last year’s short-term gains, it did not muster enough steam.
Overall, economic analysts say 2009 was a pretty dim year for the Albanian currency, which in addition to the economic indicators suffered a political blunder in late 2009 when the country’s prime minister mentioned in passing that Albania should adopt the euro, a comment which let to a rapid decline of the lek.
Officials, including the prime minister, rushed to explain the next day that he was speaking hypothetically in the long term, not immediately. But the damage had been done.
Albania could one day join the euro, but that move is at least one decade away, since the shape of the economy is nowhere near the standards of the Euro Zone. Several current EU members don’t even qualify for the European currency.
