Albania economy sees rising credit and record Lek strength

Albania is experiencing significant economic shifts characterized by a strengthening Lek and rising credit demand. According to the Bank of Albania, the private sector credit portfolio expanded by 14% year-on-year in the second quarter, with businesses utilizing 61.7% of these funds for investments and capacity expansion.

The domestic currency market has reached historic milestones. Foreign exchange trading volume hit nearly 4.5 billion euros in the second quarter, a 30% increase compared to the previous year. This surge in liquidity, driven largely by seasonal tourism and migrant inflows, has led to a continuous appreciation of the Lek against the Euro. The EUR/LEK exchange rate recently hit a historic low, dropping below 93 Lek, with some reports noting rates as low as 92.53.

While the stronger Lek helps curb inflationary pressures and lowers the cost of imports, it presents a mixed landscape for different sectors. Beneficiaries include importers and those with Euro-denominated debts, whereas exporters and those receiving remittances in Euros may see reduced purchasing power in local currency. Additionally, foreign direct investment reached a record 404 million euros, contributing to a shrinking current account deficit.