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Why is a weak euro not good news for everyone?

2026-06-29 10:30:00, Ekonomi CNA

Why is a weak euro not good news for everyone?

There is a political temptation to sell the strengthening of the lek as a medal. It sounds nice in statements: the local currency is strengthening, the economy is resisting, inflation is being curbed. But a low euro exchange rate in Albania has winners and losers.

The first winners are importers and those with loans in euros but income in lek. When the euro falls, the cost of imported goods can be eased and the installments of loans in euros become relatively more affordable. The pressure on the prices of some imported products can also be eased.

But the losers are many. Exporters receive income in euros and pay many expenses in lek. When the euro falls sharply, their margins shrink. This hits manufacturing, tailoring, export agriculture and many enterprises that already operate with low profits. The same applies to families living on remittances from emigration. If someone sends 500 euros from Greece, Italy or Germany, the family in Albania receives less lek than before. So, the real power of aid falls.

This is why a weak euro cannot be celebrated as a universal victory. It depends on which side of the economy you are on. For a citizen who buys imported goods, the effect can be positive. For a business that exports or a family supported by emigration, it can be a direct blow.

 

What really drives the euro exchange rate in Albania?

 

In the short term, exchange rate movements are influenced by seasonality. Summer brings tourists, December brings immigrants, while certain periods bring business payments, energy imports or capital movements. These are normal phenomena. But in the medium and long term, the issue is more serious. When the euro remains weak for a long period, the explanation with tourism is no longer enough.

One must look at the productivity of the economy, the structure of exports, the level of informality, capital inflows and confidence in the lek. Albania is not an economy that exports at such levels that it automatically justifies such a strong currency from industrial performance. This makes the debate quite legitimate.

The Bank of Albania has its role in monitoring and, when it deems it necessary, can intervene to smooth out strong fluctuations. But the central bank cannot solve with statements a problem that stems from the structure of the economy. If foreign exchange inflows are inflated by unstable sectors, informality or money flowing through unclean channels, then the exchange rate may give a more beautiful picture than reality./CNA





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