The euro fell, but in 2024, 2.3 times more currency left Albania than a year earlier

The current account deficit worsened last year. According to data from the Bank of Albania, the deficit reached 607 million euros, an increase of 157% compared to 2023.

This means that about 5.6 billion euros left the country, mainly for the purchase of imported products, while about 5 billion euros entered in the form of emigrant transfers, exports, tourist arrivals, income from work abroad, etc. In 2024, the deficit had decreased to only 263 million euros (4.53 billion euros of foreign exchange outflow and 4.27 billion euros of foreign exchange inflow).

The last quarter of 2024 also resulted in a significant increase in the current account deficit, amounting to 232 million euros, 55% more compared to the same period a year earlier.

The main effect on the increase in the current account deficit for 2024 was the deepening of the trade deficit in goods. The goods trade deficit last year reached almost 5.6 billion euros, an increase of 23% compared to the previous year.

The trade balance in services improved again in 2024, but insufficiently to fill the "hole" of the deficit in trade in goods.

The external account in services last year was positive at a value of almost 3.9 billion euros, up 15% compared to the previous year.

The vast majority of the surplus in services came from tourism. Statistics showed that net income in the travel item of the Balance of Payments was worth 2.3 billion euros, up 25% compared to 2023.

But while tourism continued to increase its positive contribution to the balance of payments, income from tourism declined. Net income from services for the processing of physical inputs owned by others fell to 662 million euros, 14% less than a year earlier.

Excluding the pandemic year 2020, this is the first decline in tailoring revenues since 2013. The tailoring sector has been hit hard in recent years by the strong appreciation of the lek against the euro. This appreciation has continued throughout 2024, and the exchange rate has reached new historical records in decline, near the 98 lek mark.

Remittances once again contributed to the growth in the current account balance. Last year, emigrant remittances reached 1.045 billion euros, an increase of 12.5% ​​compared to the previous year.

New waves of Albanian emigration in recent years have revived remittances, positively impacting the country's current account balance. High inflation and the decline in the Euro exchange rate over the past two years may also have encouraged the growth of remittances, enabling the preservation of the purchasing power of families dependent on them.

Despite the current account balance deteriorating significantly last year, the Euro-Lek exchange rate continued to decline. The average exchange rate fell by 7.4% compared to the previous year. One euro was exchanged for an average of 100.7 Lek in 2024, down from 108.7 Lek a year earlier, falling to a historical low. Meanwhile, the Bank of Albania purchased approximately 933 million euros in the domestic foreign exchange market in 2024.

Final data released by the central bank showed that foreign exchange purchases last year reached a historic high. The amount of foreign exchange purchased increased by 249% compared to the previous year. But even these purchases failed to stem the euro's decline.

However, the current account deficit continues to be covered by inflows to the financial account, mainly foreign direct investments. According to data from the Bank of Albania, they amounted to 1.58 billion euros, up 5.6% compared to a year earlier./ Monitor