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Trading volumes in the domestic foreign exchange market increased significantly in the second quarter of the year.
According to information from the Bank of Albania, the annual growth of trading volumes accelerated to 30% in the second quarter, from 16% in the first quarter of the year and 11.5% last year.
The increase in trading volumes mainly means an increase in incoming foreign exchange flows in the Albanian economy. It is believed that these flows are mainly related to tourism and investments in the real estate market by foreign individuals or non-resident Albanians in Albania.
The exchange rate has appreciated in the second quarter of the year, after the stable performance shown in the first quarter. The euro/lek exchange rate averaged 101.5 in April and 100.4 in May and June, from 104.0 in the previous two quarters.
During the month of July, it appeared stable near the average of the previous two months. The Bank of Albania notes that compared to a year ago, the speed and extent of the appreciation observed so far this year are significantly lower. As a result, the annual appreciation of the euro/lek rate decreased in the second quarter, dropping to 6.4% in June and further to 2.8% in July, from 9.4% at the end of the first quarter of the year.
However, the containment of the appreciation of the lek in the second quarter and the beginning of the third quarter is largely due to the intervention of the Bank of Albania, which has regularly purchased foreign currency to prevent further strengthening of the local currency.
The objective of the Bank of Albania has been to maintain the exchange rate above the psychological limit of 100 ALL. However, even this limit was broken during the month of August, as soon as the central bank released its control over the exchange rate.
According to the official exchange rate of the Bank of Albania, on Friday the euro was exchanged at 99.81 ALL, while on Thursday it reached the lowest level of all times, with 99.79 ALL.
According to foreign exchange agents, the Bank of Albania has withdrawn from interventions in the foreign exchange market this month and this has caused the euro to gradually fall below the limit of 100 lek.
Over the past five years, the exchange rate of the euro against the lek has fallen by approximately 18%. The Bank of Albania estimates that this decrease is mainly due to the rapid growth of the tourism sector and the increase in foreign investments, especially in real estate.
The strengthening of the lek helped the Albanian economy to cope with the inflationary wave of 2022 with milder consequences. Also, the strengthening of the lek is generally estimated to have played a positive role in financial stability, increasing the solvency of borrowers in euros, with income in Lek. But, on the other hand, the stronger lek has had obvious negative effects on the exporting sectors of the economy. /Monitor
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