Lek appreciates against Euro, loses ground against USD

TIRANA, May 31 – Albania’s national currency, Lek, appreciated slightly against the Euro in May, dropping to 141.91 lek per Euro, down from a record 142.4 lek at the end of last April. However, year-on-year data show Lek has depreciated by 3.3 percent against Euro. In May 2010, Lek stood at 137.26 per Euro and in May, 2009 it registered at 132.5 lek per Euro– according to central bank data. The Lek’s depreciating trend against the Euro, which is the key currency for many goods and services in Albania, started in early 2009 when the Euro began to increase sharply after remaining at an average of 123 lek for several years. Meanwhile, the US dollar climbed to 99.41 lek at the end of May 2011 after dropping to 95.9 lek in April 2011. However, year-on-year the Lek has strengthened by 11 percent against the US dollar. At the end of May 2010, the US dollar was at 111.63 lek. While the Albanian national currency continues depreciating against the Euro, financial experts are concerned over the high degree of Euroization putting Albanian consumers at risk of facing negative currency exchange risks. A considerable part of important services and large purchases, including apartments and cars and even ordinary services are offered in Euro. Expert Adrian Civici says traders do this not only to be protected from exchange risks, but also because 70 percent of imports come from the European Union. The high degree of euroization, which is estimated at 40 percent, is another reason why banks are more prone to offer credit in Euro at lower rates. However, the ongoing depreciation of the national currency against the Euro has put individuals and businesses with revenues in lek into a difficult situation. Credit in Euro accounts for almost 70 percent of total lending, according to central bank data. Experts say the depreciation of lek is temporary and is common during the beginning of the year when foreign companies operating in Albania transfer part of their profits to their countries of origin. The increasing demand for Euro following the liberalization of visas in mid-December has also affected the situation. Experts expect the Albanian lek to continue strengthening against the main two foreign currencies in the coming months with the arrival of migrants returning to spend their summer holidays at home.