The fall of the euro is boosting imports in quantity, increasing by 14% in 2024

The exchange rate has had a series of knock-on effects on the country's economy, from declining exports, bankruptcies of producers, and increased imports in quantity.

In 2024, 6.2 million tons of goods were imported, an increase of about 14% compared to 2023 (see graph below). Data show that despite lower prices, the volume of imports has expanded, keeping budget revenues on an upward trend over the past year.

The Ministry of Finance estimated that the negative effects of the exchange rate on customs revenues last year were 17 billion lek or 170 million euros. However, the decline in the euro has had an indirect positive impact on customs revenues, as cheaper prices have increased imports in quantity.

The euro's decline has made imports of goods cheaper. Since VAT and other tariffs are levied as a percentage of prices, customs have collected less direct revenue per unit of goods. But last year, imports increased by 14% in volume and by only 2.5% in value. The increase in imports has offset the decline in revenue generated by the exchange rate.

For 2024, taxed imports increased by 16% in weight compared to the previous year, while their value increased by 6%. The opposite happened with exports. They increased in quantity by 1%, but decreased in value by 14% due to the fall of the euro.

The average exchange rate in 2023 was 102.8 lek, while last year it was around 100.7 lek. In 2021, the euro was exchanged for 123 lek, while in 2016 it was 138 lek.

The data on foreign trade for the year we just closed proved that the Albanian economy has lost competitiveness in international markets. The income earned from tourism and foreign investments is going abroad for supplies of goods, signaling that the manufacturing sector, instead of expanding from the increase in visitors, is falling into the abyss.

 

According to official data, in 2024, exports recorded the largest decline since at least 2005, when the earliest data were reported by INSTAT. On the other hand, imports recorded a value of 894.3 billion lek with an annual growth of 2.4 percent, while in quantity they increased by 14%. The decline in exports and the increase in imports caused the trade deficit to record a historical record of 521.7 billion lek (5.2 billion euros).

Detailed data shows that the increase in imports is being driven by the needs of the tourism and construction sectors for goods. For example, the groups that have experienced a high increase in imports from abroad belong to hotel supplies such as sunshades, furniture and straw products, construction materials such as cement, melamine, glass, etc.

It took Albania almost three decades to establish its manufacturing sector and the "Made in Albania" brand for European markets, but the exchange rate and several accompanying factors such as increasing domestic costs and falling foreign demand have destroyed in two years what was built with effort over more than two decades./ MONITOR