Albania’s currency, the lek, continued its rise against the euro in the first five months of 2023, reaching new highs against the European single currency.
On May 11, the exchange rate was around ALL110 to the euro, central bank data showed, as the lek rose above the ALL113 to the euro recorded at the end of December 2022.
“Fluctuations in the exchange rate of the lek in the foreign exchange market have been mainly in the appreciative direction during the first quarter of the year and in the month of April, while the trading conditions in this market remain within normal parameters. The appreciation of the lek intensified in the months of March and April,” said the Bank of Albania’s latest monetary policy report.
The euro was quoted at an average of ALL114.4 and ALL112.8 respectively in March and April, compared with ALL116.4 in the fourth quarter of last year and in January.
The average level of the lek/euro exchange rate recorded in April represents an annual appreciation of the lek of 6.7%, the central bank said.
Explaining the rise of the lek, the central bank said: “The increase in the exchange rate against the euro is a reflection of the increased supply of the currency in the domestic financial market. It is dictated by the improvement of the balance of payments as a result of high foreign currency inflows, which are estimated to be present in the first months of this year as well … The appreciating performance of the lek is also supported by the widening of the positive difference between the rate of return of funds in lek and that in euros in the domestic market.”
In the first few months of 2023, the lek also strengthened against the US dollar. The dollar was quoted on average at ALL106.9 and ALL103.1 in March and April respectively, compared with ALL108.0 in the first two months of the year and ALL114.5 in the fourth quarter of last year.
The high lek has contributed to Albania’s relatively low inflation compared to its peers in the region. Annual consumer price inflation peaked at 8.3% in October 2022, well below the double-digit inflation rates recorded in some countries in Central and Southeast Europe.
However, the strong lek has worried exporters, who met with central bank governor Gent Sejko earlier this month to outline their concerns.