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The holidays sink the Euro, the exchange rate falls below the level of 113 lek for the first time in history

2022-12-28 17:41:25Biznes SHKRUAR NGA REDAKSIA VOX

 

The holidays sink the Euro, the exchange rate falls below the level of 113 lek
Holidays sink the Euro

 

The euro has suffered another very strong drop in the exchange rate with the lek on Wednesday.

According to the official exchange rate of the Bank of Albania, the Euro fell to the level of 112.83 ALL, losing more than one point compared to Tuesday. Since the beginning of December, the Euro-Lek exchange rate has decreased by 3.45%, while since the beginning of 2022, the decrease has reached 6.44%.

According to market agents, this week there is a further increase in the foreign exchange supply in the market, due to the festive season. This is a more or less common seasonal trend, associated with the increase in inbound tourism and the return of expats for the holiday season.

However, this year the seasonal effect is following a period when the positions of the Euro were already quite weak, due to the continued high supply, but also due to the strong curbing of demand by the Albanian Electricity Corporation, starting from the part of the end of November.

The fall of the Euro has also been influenced by other sporadic elements, such as the decision of one of the commercial banks to convert a part of the share capital from Euro to Lek. All these factors are bringing an unprecedented devaluation of the Euro against the Lek.

Most of the market agents state that throughout 2022 a high foreign exchange supply has been observed in the market. This high offer has determined the downward trend of the Euro against the Lek, despite the increase in the price of imports in general and the large purchases of KESH in particular, as well as the planned purchases by the Bank of Albania, for the needs of the foreign exchange reserve.

The high supply has been influenced by the growth of tourism, exports of services and remittances, but nevertheless, as a whole, the current account deficit of the country until the end of the 9th month was in values ​​close to the same period last year.

On the other hand, foreign direct investments have marked a significant increase, by 35%, although they have been dominated by reinvested profits. In particular, increasing foreign investments in the real estate market have had an impact on the growth of foreign exchange flows.

Beyond the factors measurable by official statistics, market agents believe that large informal flows have a significant contribution to the high foreign exchange supply and the devaluation of the Euro against the Lek.

The strengthening of the local currency against the Euro, which is at the same time the main currency in Albania's commercial exchanges, plays a positive role in the direction of easing inflation. The analyzes of the Bank of Albania have shown that the strengthening of the Lek is one of the factors that have softened the strong inflationary pressures from abroad and have caused Albania to have one of the lowest inflation rates in Europe. The strengthening of the Lek is also favoring Albanian families who have loans in foreign currency to pay less to buy the currency needed to repay the installments.

However, the fall of the Euro and the appreciation of the Lek have also lost sides. Exporters and especially the fashion sectors have suffered a significant blow from the devaluation of the Euro this year.

Also, Albanian families that have a high dependence on remittances are also being negatively affected by the drop in the Euro exchange rate. Given that the Euro is the dominant currency in the structure of bank deposits, in theory even individuals who have deposits in Euro are affected by the fall of the European currency./Monitor


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