Euro drops to record low against lek since summer 2010

TIRANA, Dec. 6 – Fear of the Eurozone debt crisis putting the existence of the single currency at stake has also been reflected on the Albanian exchange rate with Euro losing considerable ground against the Albanian national currency, lek. After remaining at record highs, above 140 lek, from March to November 2011, the Euro dropped to a record low of 136.31 lek at the beginning of this month, according to official Bank of Albania exchange rate on Monday. On Wednesday this week, the Euro rose again to 139.26 lek.
The European currency had not been as low as 136.31 lek since August 2010, when it was at an average of 136.24 lek.
The national currency, lek, has lost around 15 percent during the past 3 years against the Euro, the main currency used in real estate lending. The situation is especially difficult for those persons with income in lek and having to pay loan instalments in euro, which accounts for 60 percent of the total credit.
In November 2008, when the global crisis broke out Euro stood at an average of 123.29. Since then it has been on an constant appreciation trend against Lek, climbing to a historically record high of 141.97 lek in June 2011 and to 140.97 lek in November 2011.
Financial experts explain the appreciation of lek against the Euro during the first days of this month with a psychological impact from the troubled euro, leading Albanians to switch their deposits from Euro to lek and business demand for Euro on a falling trend.
If the depreciation of Euro continues, it will favor borrowers of Euro-denominated loans, paid in lek, who have been losing considerable during the past 3 years.
Domestic producers importing raw material for manufacturing will also be slightly favored while Albanian exports, whose majority of more than 60 percent is destined for EU, will be depreciated.
Albanian Lek only slightly recovered by 1.2 percent against the Euro in the third quarter of this year when migrants rush home to spend their holidays. The slight recovery is also a result of ongoing crisis in Greece and Italy, where more than one million Albanians live. Job cuts in the construction and agriculture industries, where the majority of Albanians are employed abroad, have led to lower remittances since 2008.
While the Albanian national currency continues depreciating against the Euro, financial experts are concerned over the high degree of Euro-ization putting Albanian consumers at risk of facing negative currency exchange risks. The ongoing depreciation of the national currency against the Euro has put individuals and businesses which have borrowed in foreign currency, but have their revenues in lek, into a difficult situation.
Meanwhile, the US dollar has been gaining ground against lek since last summer climbing from 97.48 lek to an average of 103.82 lek in November 2011.
During the third quarter of 2011, lek lost 2.7 percent against the Euro and 6 percent against the US dollar, y-o-y say the Bank of Albanian in its latest monetary policy report.