The market is "suffocated" by the euro, falling to another historic low

The common currency has continued to lose points at a fast pace in relation to the Lek, exceeding all forecasts.

According to the official exchange rate of the Bank of Albania, one euro was exchanged today for 104.85 ALL, depreciating by 0.86 ALL compared to the previous day. This is the biggest daily drop this year and the strongest since December 28, 2022.

At these levels, the Euro has marked another historic minimum in exchange rates with the Lek, since it began to be implemented as an official currency in January 2002.

Compared to the beginning of the year, the Euro has fallen by 9.69 ALL, or 8.4%, while compared to the same period a year ago, when the common currency traded at 119.12 ALL, it is exchanged for 14.35 ALL less (12% depreciation). .

In the market at noon, the Euro went down to 104 lek, according to sources from the market.

Contacted by "Monitor", major market players said that this trend is related to the high supply in the market. According to them, the market is "drowned" in euros and traders have nowhere to sell, while they are not buying.

The increase in the number of tourists has influenced the increase in the supply of foreign currency. In May, according to INSTAT, about 17% more foreign citizens entered the country than in the same period a year ago, while for the 5th month there are 42.5% more entries. However, in May, when the strong fall of the euro began, the growth rates of foreigners were the lowest compared to the previous months.

Another sustainable source of foreign exchange is informal inflows, which are mainly channeled into the real estate market. INSTAT announced that in the first quarter the economy grew by 2.76%, while "Real estate activities" influenced by +0.62 percentage points, and "Construction" by 0.42 percentage points, both influencing 38% of total growth of the economy.

The strong fall also encourages speculation in the market. Foreign exchange agencies have increased the selling-buying margin to around 1.5 ALL, an indicator of large fluctuations, while generally this margin fluctuates between 0.5-1 ALL.

Market players expect that the euro will continue to be weak, as after the 20th the arrivals of immigrants increase. Traditionally, August and December always mark the lowest values ​​of currency exchange due to increased inflows from immigrants.

All other currencies fall

Besides the euro, all other currencies have recorded a strong decline, showing that the fluctuations are related to the internal factors of the high supply of currency, which causes foreign currencies to pull each other down. The dollar fell by 0.95 ALL to 96.18 ALL. The pound depreciated by 0.90 allek, to 122 allek, the Swiss franc by 0.42 allek, to 107.49 allek.

The economy slowed in the first quarter

One of the arguments of the officials has been that the strengthening of the lek reflects the good performance of the economy. Meanwhile, the latest data from INSTAT revealed that at least in the first quarter of the year, the growth rates of the economy have slowed down, reflecting the consequences of high immigration that has affected consumption and price increases.

In contrast to this trend, real estate has kept the economy afloat. Growth in trade, hotels and transport, an indicator of consumption, has been minimal, while industry has declined, reflecting unfavorable international conditions for selling prices and rising business costs. Especially the industry, mainly the exporters, have been significantly affected by the devaluation of the euro, which has reduced their income in lek.

INSTAT announced that the Gross Domestic Product (GDP) in the first quarter of 2023 is estimated to grow by 2.72%, compared to the first quarter of 2022. This is the lowest growth rate since the third quarter of 2020, when the country was suffering the consequences of the pandemic./ Monitor