Euro fell, but external deficit increased in the second quarter, due to imports and a slowdown in tourism

2025-09-11 07:23:00, Ekonomi CNA

Euro fell, but external deficit increased in the second quarter, due to imports

The current account deficit increased in the second quarter of the year. According to data from the Bank of Albania, this deficit amounted to 263 million euros, 19% more compared to the same period last year.

However, for the entire 6-month period of 2025, the current account deficit remains in decline, with a total value of 561 million euros or 3.1% less compared to the same period last year.

In the last two years, the current account deficit for the 6-month period has reached its highest levels since the pandemic. However, due to the large impact of the tourist season on the external balance, the deficit has a tendency to narrow significantly during the third quarter of the year.

The trade deficit in goods continues to determine the deficit position of the current account balance, but this deficit is partially offset by the positive result in trade in services and secondary income, mainly remittances.

For the 6-month period, the trade deficit in goods reached 2.71 billion euros, an increase of 4% compared to the same period last year.

In the second quarter of the year, exports returned to decline, while imports of goods escaped growth, resulting in a larger trade deficit in goods. However, the pace of growth in the deficit in goods appears slower compared to previous years.

Exports of services are partially compensating for the deep deficit in goods. The balance in trade in services was positive at approximately 1.59 billion euros, up 6.4% compared to the first half of last year.

More than half of the contribution to the services sector came from tourism, which in the first 6 months of the year brought the economy net income worth 798 million euros, up 7.8% compared to the first half of last year. The growth of tourism income, however, also has a slowing trend.

On the other hand, the contribution of tailoring appears almost stagnant. Revenues from services for processing physical inputs owned by others reached 361 million euros, 0.8% more compared to the same period a year ago.

In addition to the export of services, secondary income and mainly remittances from emigrants remain the second pillar that mitigates the country's high trade deficit in goods. For the 6-month period, emigrant remittances reached 532 million euros, an increase of 4.3% compared to the first half of last year. Remittances this year have reached their highest historical value for the first 6 months of the year. A new cycle of their growth has begun in the last decade, supported by new waves of Albanian emigration.

Immigrants brought a record 532 million euros in the first 6 months, inflows towards stabilization

The negative net flows in the current account balance are, however, covered by foreign direct investment income and other informal inflows from abroad, which cannot be accurately estimated. For the first half of 2025, the total value of foreign direct investment reached 759 million euros, with a small increase of 1% (about 8 million euros) compared to the same period last year.

Foreign Direct Investments Resist Slight Growth

Despite the worsening deficit, the euro has continued to depreciate. In the second quarter of 2024, the average euro exchange rate was 100.7 lekë, according to the Bank of Albania, while in the second quarter of 2025 it fell to 98.4 lekë./ Monitor