The Euro has lost all of the points it gained against the Lek at the start of the year, and has been steadily falling since February 1st. According to the Bank of Albania’s official exchange rate, 1 Euro is worth 113.97 Lek, down from 115.1 Lek just two weeks ago.
The reasons for these market changes are tied to the strengthening of the Lek, which has also been reflected against other important currencies such as the US Dollar and the British Pound.
The Lek’s position has been bolstered by the market’s substantial supply of foreign cash, paired with a shortage of imports of electric energy.
However, such depreciation causes more issues than benefits, beginning with a decline in private and business savings, as well as a decrease in purchasing power with remittances from immigrants, because the main expenses are in Lek. Similarly, export companies’ profit margins are shrinking as a result of increased expenses and internal demand for salary rises.
On the other side, anyone with a loan in Euros and income in Lek, such as households with home loans, as well as the state itself, is compensating for the increase in interest rates with this currency weakness.
In these conditions, and with the start of tourists, the Euro is projected to fall further, possibly even below the historical low of 112.8 Lek set in late December.