Will the euro appreciate in the second half of 2025? - Themeli: The exchange rate is expected to not be as strong as in 2024
According to forecasts, by the end of this year, the exchange rate will not be as strong as in 2024, so the exchange rate movements will be softer, the euro will not depreciate as much against the lek as in the year before. This was stated by Erald Themeli, Director of Monetary Policy at the Bank of Albania, as he emphasized that the effect of the exchange rate in keeping inflation under control will not be as great this year.
"I emphasize that during 2024, we had an inflation level slightly below the Central Bank's target, so the average level was 2.2% and to a large extent this is related to the restraining effect brought by the rapid strengthening of the exchange rate during 2024. For 2025 and beyond, despite the problems with the exchange rate forecast, we expect a more balanced performance of this indicator in relation to the developments that have been observed in the last two years, which means that the restraining effect on inflation that we had in 2023 and 2024 will no longer be so strong in the future."
The Albanian economy continues to have positive development trends, manifested in terms of economic growth, but also in terms of low and controlled inflation, the low and declining level of public debt, as well as improving labor market indicators.
"The economic growth rate for 2024 remained at 4%, fueled to a large extent by the expansion of household consumption and overall investment in the economy, both in the public and private sectors. The expansion of domestic demand reflects both the sound financial balances of the Albanian economy and favorable financing conditions, meaning the level of interest rates and general lending conditions, which have favored a rapid increase in credit, which have supported the expansion of consumption and investment.
We continue to have an increased positive contribution from the growth of tourism exports, as is already known, Albania has become an important tourist destination and this profile of aggregate demand or expenditure profile in the economy, has been reflected in the expansion of activity, mainly in the service and construction sectors, while the industry and agriculture sectors, as we have noted, continue to have a slower performance, because they have specific problems in their development.
Themeli also stated that the global context continues to show high uncertainties resulting from geopolitical tensions, but also from the trade war and plans to impose tariffs at outrageous levels between competing geopolitical blocs, which would be a negative blow to the Albanian economy. If these shocks materialize, they will be reflected in the monetary policy stance.
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