The euro-lek exchange rate is at its lowest level since mid-August

2023-11-03 08:30:00, Ekonomi CNA

The euro-lek exchange rate is at its lowest level since mid-August

Illustrative photo

The Euro to Lek exchange rate is falling again. According to the official exchange rate of the Bank of Albania, the European currency was exchanged today for 105.36 ALL.

The Euro exchange rate has fallen for six consecutive days, reaching its lowest level since August 17.

The Euro-Lek exchange rate touched historical minimum levels in July, coming very close to the 100 Lek limit. In the month of August, the exchange rate experienced a rapid growth that took it above the limit of 110 lek.

Then, during the month of September, the rate dropped to close to the level of 106 lek, while until the last week of October, the rate was generally stable near the level of 106 lek. But, in the last few days, the exchange rate is marking a new downward trend and is now heading back to the limit of 105 lek.

According to foreign exchange market agents, the exchange rate has fallen to a significantly lower balance this year. On the one hand, this is due to high foreign exchange inflows, which have increased the supply of foreign currency in the market. The tourist season this year has reached record numbers and has been extended further in time. The expectations of tourist operators are that the boom in tourism will continue next year.

On the other hand, the supply of Lek this year has been tight, due to higher interest rates and especially due to the restrictive fiscal policy and the high budget deficit.

Such a situation has steadily reduced the Euro-Lek exchange rate to the highest historical levels. In theory, yesterday's increase in the basic interest rate by the Bank of Albania could have a further effect in terms of strengthening the lek in the exchange rate.

One of the few factors that can bring about a temporary strengthening of the Lek can be the concentrated spending of the budget deficit in the last month of the year.

Such a phenomenon was also observed last year, when the Euro-Lek exchange rate marked a significant increase, due to large budget payments that were concentrated in the last days of December. However, this effect is expected to be transient.

The Bank of Albania has warned that it will continue to increase the base rate until close to the equilibrium level, which is estimated to be close to the limit of 4.5%. Based on the 2024 draft budget, the fiscal policy is also expected to maintain a consolidation trend, an element that also favors a strong Lek in the exchange rate./ Monitor