Lek vs Euro– trade deficit stood at ALL42bn (€419mn) in June, with exports of food, textiles, and construction materials falling annually. The high value of the lek took its toll on Albanian exporters. The country’s large textiles and footwear sector has suffered the most, with industry representatives warning in 2023 that 75,000 jobs were at risk as the high lek made exports less competitive. The tourism sector has also become less competitive.
Lek vs Euro: Albanian Currency Breaks ALL100/EUR Barrier for the First Time
The Albanian lek has surged past the symbolic ALL100 to the euro mark for the first time, achieving a record high against the European currency. On August 12, Bank of Albania data revealed that the euro was exchanged at ALL99.95, marking a historic moment in the euro vs lek exchange rate battle.
Bank of Albania’s Struggle to Stabilize Euro vs Lek Amid Tourism Boom
Despite the Bank of Albania’s determined efforts to keep the euro from falling below ALL100, the summer influx of tourists has driven the lek to unprecedented heights. Since May, the central bank has actively intervened in the foreign exchange market, buying euros and collaborating with commercial banks to stabilise the currency. However, more than these actions are needed to counter the seasonal exchange rate pressures that typically peak between late July and early August.
Since 2020, the euro-lek exchange rate has plummeted by nearly 20%, primarily driven by Albania’s booming tourism sector and rising foreign investments, especially in real estate. While the Bank of Albania’s interventions have managed to slow the annual decline to approximately 3.8% compared to last year, its primary focus remains on controlling inflation, which has stayed below the 3% target for several months.
In July, annual consumer price inflation was reported at 2.1%, with the Harmonised Index of Consumer Prices (HICP) showing a 2.5% increase in June. To manage this, the Bank of Albania reduced its monetary policy rate from 3.25% to 3% in July, maintaining this rate at its August meeting.
The strengthening of the lek has helped Albania navigate the inflationary pressures of 2022 with milder effects compared to neighbouring countries like North Macedonia. It has also improved financial stability by enhancing the solvency of euro-denominated borrowers with incomes in lek. However, the stronger lek has negatively impacted export-oriented sectors, with Albania’s trade deficit standing at ALL42bn (€419mn) in June. The country’s large textiles and footwear sector has been hit the hardest, with industry leaders warning in 2023 that 75,000 jobs are at risk as the high lek makes exports less competitive. The tourism sector has also felt the strain, becoming less competitive due to the strong euro vs lek exchange rate.
