Elections approaching, Euro towards 98 Lek, Dollar at its lowest level in 17 years

The Euro started May on a downward trend and reached its lowest levels this year against the Lek.

According to the official exchange rate of the Bank of Albania, the European currency was exchanged today for 98.2 lek.

These exchange rates were last recorded in January of this year, while the Euro-Lek ratio is once again approaching the lowest historical levels, which were recorded at the end of 2024.

According to foreign exchange agents, a decline in the Euro to these levels with the start of the summer season was expected.

According to them, this decline is due to an increase in the supply of foreign currency in the market, mainly for two reasons. First, the long weekend has brought an increased influx of tourists from Kosovo and North Macedonia, bringing in more foreign currency. Second, historically, as election day approaches there is a depreciation of the common currency, which may be related to the use of euros in the campaign.

Last year, the exchange rate was also characterized by a tendency for the Euro to appreciate against the Lek, which was limited only by the unprecedented interventions of the Bank of Albania.
The Bank of Albania purchased approximately 933 million euros in the domestic foreign exchange market in 2024, reaching a historical high. The amount of foreign exchange purchased increased by 249% compared to the previous year.

With inflation falling below the 3% target, the Bank of Albania intervened in the foreign exchange market to prevent further appreciation of the local currency.

Despite the interventions, the average Euro-Lek exchange rate last year suffered a 7.4% decline compared to 2023. During November 2024, the Euro exchange rate also recorded its lowest historical level at 98.11 Lek, while it closed 2024 very close to this value.

In the absence of these interventions, it is clear that the decline in the Euro exchange rate against the Lek would have been even greater.

The exchange rate trends appear to be similar this year. According to agents, the foreign exchange supply appears to be increasing, although the growth of foreign tourists, at least according to statistics so far, has slowed down significantly. For the first three months of 2025, foreign national arrivals increased by 6% compared to the same period a year ago.

On the other hand, fiscal policy continues to be restrictive, despite the upcoming elections. At the end of the quarter, the budget was again in significant surplus, at almost 34 billion lek, with a further increase of 4% compared to the same period a year ago.

Looking at exchange rate trends, it will be difficult to avoid a further decline in the Euro in the coming months, without the intervention of the Bank of Albania.

In parallel, the Lek has also strengthened against other major currencies. The US dollar has fallen to 86.6 Lek, its lowest level in 17 years. The dollar's decline in recent months mainly reflects the performance of this currency against the Euro, as a result of the tariffs imposed by the Donald Trump administration./ Monitor