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The fall of the euro broke new records, the European currency close to the threshold of 110 lek

2023-05-30 14:17:00, Ekonomi CNA

The fall of the euro broke new records, the European currency close to the

The exchange rate of the euro with the lek is touching new records in decline during this week.

According to the official exchange rate of the Bank of Albania, the euro was exchanged on Tuesday at 110.19 ALL, down by another 0.43 points since the end of last week. The annual decline of the euro exchange rate has already reached almost 9%.

The fall of the euro seems unstoppable, since the tourist season has not started well. According to market agents, the supply of the European currency is high. High inflows of European currency in recent years have significantly increased the monetary amount in euros.

These flows can be explained by the strong growth of tourism income in the post-pandemic period, the good performance of the export of services in general and a new cycle of growth in remittances and high values ??of foreign direct investments, while an element with foreign exchange flows from informal sources also have an impact on the market.

Euro deposits are continuing their uninterrupted growth even in the first months of this year. At the end of April, they reached almost 6.5 billion euros, up almost 17% compared to the same period a year ago. For the same period, the annual growth of deposits in Lek is much lower, with only 3.5%.

As a whole, the indicator that expresses the monetary supply in lek, the monetary aggregate M2, is recording very low rates of annual growth, with only 2.4% at the end of April.

The slowdown of the money supply in lek has started to show the effects of the tightening of the monetary policy by the Bank of Albania and the slower credit growth, but also partly the effect of the fiscal consolidation policy. By the end of April, the state budget was in significant surplus, even at even higher levels compared to the same period last year, with 78% more.

All these factors seem to have significantly affected the balance of supply between the main currencies used in the Albanian economy. Now that the summer season is officially upon us, the expectations for the increase in the supply of euros and the further strengthening of the lek are becoming even higher.

The unprecedented appreciation of the domestic currency makes imports cheaper, although so far such an effect is not translating into lower prices of imported consumer goods. However, in its own analysis, the Bank of Albania estimates that in the absence of the appreciation of the lek, the increase in consumer prices would have been higher.

The strong lek is also helping foreign currency borrowers, including the Albanian government, businesses and families. The effect of the exchange rate is significantly reducing the public debt and the monthly value of the loan installment in euros for all subjects with income in lek.

On the other hand, the fall of the euro is hitting businesses exporting goods and services, which due to the effect of the exchange rate, have suffered an annual decrease in income by approximately 9%.

The strengthening of the lek is also hurting the fragile segment of families dependent on remittances and may become a factor that will encourage the increase of their flows from immigrants, to maintain the purchasing power of their families while the lek strengthens./ Monitor.al