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The downward spiral of currencies, the historical weakening of the euro against the lek does not stop

Politiko 2024-11-13 15:58:37

The downward spiral of currencies, the historical weakening of the euro against

The Euro has entered a strong downward cycle that has been going on for a long time now. In recent weeks, the downward trend of the European currency has become even more visible, despite the fact that we are not at the height of the tourist season and nothing has happened in the economy for such a movement. Consequently, the questions about what is happening with the exchange market become even stronger.

Today, the euro has dropped to 98.1 lek, a previously unrecorded level. As can be seen from the graph, the European currency has fallen from the level of 127.5 in 2018 to 108.7 lek last year and to mark new historic lows this year.

Such a strong drop is a consequence of the increase in the amount of euros in circulation, from formal sources such as tourist flows, remittances, but also from informal channels. Such a situation affects not a little the economic activity of the country and the finances of a good part of the citizens.

The downward spiral of currencies, the historical weakening of the euro against

This is because today, half of our economy is euroized. In other words, 50% use the euro as a payment currency, despite the fact that the official currency is the lek.

But which are the sectors where the euro is used massively?

The downward spiral of currencies, the historical weakening of the euro against

The financial sector leads, where about 60% of deposits are in European currency and almost 40% of loans are taken in euros. The real estate market is developed entirely in euros, both in the case of property sales and rental. Tourism also makes the vast majority of payments in euros, while in recent years, even the services sector has been using the euro as currency. We buy in stores in euros, we use it in restaurants, even at gas stations.

Faced with such a situation and the massive use of the euro in the Albanian economy, what are the risks?

The downward spiral of currencies, the historical weakening of the euro against

The main risk is exposure to exchange rate fluctuations, where exporters and all those who have income in euros, such as families who receive remittances, have been the most affected. The second risk is the lack of transfer of the effects of monetary policy, as in the case of the inflation crisis, which we just experienced. The interventions of the Bank of Albania affect only the half of the economy that operates with the lek, leaving out of any impact the rest that uses the euro./ A2CNN

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