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What "sunk" the euro? Informality, tourism, remittances or...

2024-05-04 10:48:50Biznes SHKRUAR NGA REDAKSIA VOX

What "sunk" the euro? Informality, tourism, remittances or...

The devaluation of the euro to a previously unknown point (1€=100.31 L), brought back the eyes on the exchange rate. From tourism to public debt, the analysis carried out by the Altax center on all the factors that have the power to weaken the euro, confirms that it is not the formal economy that is causing this.

From the end of 2023 to the beginning of 2024, the euro has depreciated by 3.8% (when it was around 103 ALL), confirming the presence of an unusual amount of European currency that is illegally introduced into the Albanian market.

Early start of the tourist season

In the first months of the year and on the eve of the tourist season, 1.54 foreigners visited Albania, 43.3% more than a year ago. In the absence of data from the Bank of Albania for the first quarter 2024 of the value generated by these tourists, on a comparative basis related to the increased number of visitors of 43.3% more, the calculation reaches an entry of the main currencies up to 900 million euros.

In the first quarter of 2023, 435 million euros came out of Albania and following the same logic as above to find the amount collected in the first quarter of 2024, a figure of 550 million euros comes out.

The difference in values ​​from 2023 to 2024 is 350 million euros. These figures show that the devaluation of the euro was stronger this year than in 2023.

Trade balance

The trade balance for the first quarter of 2024 results in a deficit of ALL 113.7 billion (EUR 1.09 billion), while a year ago the deficit was ALL 85.7 billion (EUR 790 million). The difference of 300 million euros shows that these euros have remained in the countries where Albania has imported products.

The effect of currency outflows from the country for imports has an impact on the evaluation of foreign exchange rates.

REMITANCES

In the first three months of 2023, remittances reached the value of 214 million euros. Altax predicts the same figure for 2024 as well, in the absence of figures from BSH.

The effect of currency inflows from senders outside Albania has an impact on the devaluation of the exchange rate of foreign currencies.

Foreign investments

Due to the withdrawal of SHELL investments and the stability of the real estate market in 2024, Altax predicts that foreign investments will be at the same levels as in the first quarter of 2023, 308 million euros. The effect of foreign currency inflows from foreign investments has an impact on the devaluation of the foreign currency exchange rate.

Public debt

At the end of the third quarter of 2024, Albania's public debt was 5.65 billion ALL lower than the same period of 2023. Not receiving a new debt from foreign markets is a positive indicator for the weakening of the lek and the appreciation of the exchange rate of foreign currencies.

government

General public expenditures (mainly current) from 2023 to 2024 have increased by 49 million euros. The higher the government spending, the stronger the currencies and the weaker the lek.

Interest rates

The interest rate of lending to the economy for the first quarter of 2024 remained at the levels of 2023, at 3.25%. Compared to Tr.1 in 2023, there seems to be little change in the direction of the interest rate of lending to the economy, while obviously this increase in the interest rate in 2023 has shrunk lending to the economy and individuals. The effect of the decrease in lending from the financial system has an impact on the evaluation of the exchange rate of foreign currencies, as the supply of Lek strengthens.

Thus, the net effect from tourism is influential in the devaluation of the Euro and other currencies, but largely dampened by the effect of the negative trade balance. The effect from public spending has an impact on the weakening of the lek, completely amortizing those impacts from the tourism factor. The effect from remittances and foreign investments are not influential in the devaluation of the euro, since their effect is amortized by not receiving a new debt, so there is no new inflow of euros.

The price volatility caused by informal money in the financial system is affecting the credibility of the economy, where entrepreneurs invest mainly in the country's real estate, which accounts for 1/4 of foreign investment, after taking into account the country's risk in sector investments others. / "SI" newspaper


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