TIRANA, May 11 – Albania’s national currency, lek, hit a seven-year high against Europe’s single currency this week in an ongoing strengthening trend since mid-2015.
The euro dropped to as low as 134.3 lek this week in levels not recorded since late 2009, depreciating by 4 percent compared to the average exchange rate of 140 lek for about five years until mid-2015.
In its latest monetary policy report, Albania’s central bank says the national currency’s appreciation against the Euro is a result of a pickup in exports, higher tourism income and foreign direct investment since the second half of 2016, increasing the supply of Europe’s single currency in the local market.
“In general, the performance of the euro/lek exchange rate has reflected the ratio of higher supply of euro compared to demand by the national economy,” says the central bank.
The depreciation of the Euro against the Albanian lek is good news for borrowers in Euro who have their income in lek and government’s external debt payments, but bad news for Albanian exporters who have been facing a sharp cut in commodity prices since the mid-2014 slump in commodity prices. Two-thirds of Albanian exports are destined for Eurozone countries which makes then vulnerable to Euro fluctuations.
The sharp fluctuations have a huge impact on the local economy which faces high euroization rates, with the single European currency accounting for more than half of total credit and being the main currency in the real estate market.
Some local experts have partly blamed the rising cannabis cultivation and the increased presence of Euro in Albania due to drugs sales abroad for the sharp depreciation of lek against the Euro.
