Flash News

Fatal collision between two vehicles in Lushnja, one dead and 5 injured

Tragedy in Guyana, ferry sinks with 116 passengers on board

Journalist Enrik Mehmeti lost his life in an accident, who was he? He dedicated over two decades to his profession

Assassination in Saranda / Thimjo Rubati was shot with 3 bullets, here is his health condition

Assassination of Thimjo Rubati, abandoned motorbike may lead to identification of perpetrators

OPINEWS

What has influenced the appreciation of the lek?

Politiko 2026-07-19 15:34:23

Irena Beqiraj
Albert Einstein said: "Not everything that counts counts and not everything that counts counts counts".
This expression came to mind while I was summarizing these lines about the overvaluation of the lek or as the Bank of Albania calls it, the lek appreciation.
Can tourism revenues explain the lek appreciation?
While the largest lek appreciation was observed in 2023, tourism flows and the annual appreciation of the Albanian Lek (ALL) against the Euro (EUR) from 2020 to 2025 are low.
According to the econometric modeling of the Bank of Albania, only 23% of the overall volatility and structural appreciation of the lek during the period 2020 -2025 is directly attributable to tourism revenues.
What about the flow of foreign direct investment?
The Pearson correlation coefficient between the annual growth (YoY) % of Foreign Direct Investment (FDI) flows and the annual appreciation of the Albanian Lek (ALL) against the Euro (EUR) from 2020 to 2025 is negative -0.3588.
This weak negative correlation between the rate of acceleration of FDI growth and the rate of acceleration of currency appreciation during this specific period indicates that the acceleration of Lek appreciation has been statistically decoupled from the rate of FDI percentage growth.
What remains? Remittances or remittances!
The only positive correlation of around 0.75 is observed between the annual growth (YoY) % of remittance flows and the annual appreciation of the Albanian Lek against the Euro (EUR).
But unfortunately their specific weight in the addition to the money supply cannot fully explain the experienced appreciation of the Lek.
So, econometric analysis shows that in the years 2020 - 2025, 25% to 40% of the appreciation of the lek remains unjustified by income from tourism, foreign direct investment, or remittances passing through official channels.
Meanwhile, the official figures of the real economy do not fully justify the appreciation of the lek, meaning that there is an unofficial real economy that is supplied with flows in foreign currency that are not counted, but that is worth addressing when talking about the strengthening of the lek.
-The devil is in the details!
Although the Bank of Albania does not openly oppose the government, when it talks about the strengthening of the lek it calls it appreciation.
If we are to refer to the currency as a security, its valuation depends on the Purchasing Power Parity (PPP).
It is undervalued when the price of the currency is lower than justified by economic fundamentals;
Fairly valued (in equilibrium): when the market exchange rate accurately reflects its real economic value based on supply and demand and purchasing power;
Overvalued when the currency is trading more expensive than economic fundamentals and purchasing power justify.
Meanwhile, all economists who understand the effects of appreciation on welfare and the economy in the long term should be concerned.
Every economist free from state duties is within his right to attribute this appreciation to any additional undeclared factor, and to demand intervention to change the situation.
Meanwhile, every economist who exercises state duties has the duty not only to listen but also to argue with measurements why the lek is overvalued and what has led to this appreciation, which must definitely be balanced!
PS. This status may be difficult for the non-economist reader, but today this is how the mule loved the wood