Why is the euro depreciating? - Analysis/ Appreciation of the Lek, from tourism and remittances
For a long time now, the Lek has continued to be strong against the European currency. But what are the reasons for its appreciation and how has it fluctuated over the years?
Referring to an analysis made by ALTAX, of the behavior of the exchange rate in Albania during the period 2015–2025 shows that the relationship between the lek and macroeconomic factors is not uniform in time nor symmetrical in intensity. The exchange rate does not react the same in all economic situations, but exhibits different behaviors depending on the phase of the economic cycle, the level of pressure in the market and the structure of foreign exchange flows. In this sense, the movements of the lek cannot be interpreted as the result of a simple monetary mechanism, but as the product of an economic structure characterized by asymmetry, euroization, pronounced seasonality and selective institutional intervention.
One of the most consistent findings is that the lek lacks a clear self-regulating mechanism. According to the analysis, in periods when the lek strengthens significantly, it tends to remain strong for longer than would be justified by real economic fundamentals.
According to the analysis, foreign exchange flows from tourism and inflows from various sources play a key role. Over the past few years, the significant increase in the number of tourists and the increase in remittances from emigrants and other sources have created a structural surplus of euro in the market, which is not fully neutralized by the demand for imports or investments. This has produced a continuous pressure towards the strengthening of the lek, especially in the periods when these flows are at their peak. In other words, the Albanian economy is more sensitive to foreign exchange inflows than to their lack, which creates a structural trend towards the appreciation of the lek.
The analysis also states that inflation and interest rates only affect when they cross high perception thresholds, not under “normal” conditions. Meanwhile, the Bank of Albania's interventions are effective only in extreme situations, not as a daily stabilization instrument.
According to the analysis, the economy is deeply euroized and the Euro is still used as a store of value, while the Lek remains mainly an accounting unit. It is noted that the strengthening of the Lek helps imports and inflation, but harms exports and domestic production.
The findings suggest that the exchange rate in Albania is not simply the result of supply and demand in the foreign exchange market, but a reflection of an economic architecture built on euroization, seasonality, and unstable expectations.
Monetary policies have a limited role and function mainly in extreme conditions, while structural and institutional factors remain the real determinants of the dynamics of the lek.
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