Albanian exporters face mounting pressure from euro depreciation
July 28 (SeeNews) - A sharp depreciation of the euro against the Albanian lek over the past five years, from above 120 leks in mid-2021 to below 95 leks per euro last week, is squeezing Albanian exporters of goods and services, industry representatives and financial experts say.
For local manufacturers, the
currency rate changes mean that major costs such as labour, energy and rents,
which are calculated in leks, are rising and making their products pricier and
less competitive in the European market, while revenues from exports, in euro,
are further eroded by the depreciation of the EU single currency.
Manufacturers of textiles and footwear, Albania's largest export industry, have been particularly exposed to the impact of the unfavourable currency rates.
Compared to 2022, Albanian
manufacturers of textiles and footwear recorded a 23% drop in the value of
exports in 2025, data from the country's statistics office, INSTAT, shows.
Albania's total exports saw a 28% decline last year compared to 2022, as its trade
gap expanded by 15%
"The European market is very
competitive and customers can shift production to other countries with lower
costs. For this reason, some Albanian companies accept contracts with very
reduced margins just to retain their customers and workforce, and continue
activity," Edvin Prence, president of Proexport, Albania's association of
textile, clothing and shoes manufacturers, commented for SeeNews last week.
For many businesses, it is no
longer a matter of lower profit margins, but a struggle to cover costs and
preserve jobs.
."Many companies are seeking
to renegotiate prices with foreign clients, especially with Italian and
European partners. Demands relate to increasing the unit price, indexing
contracts to the exchange rate, sharing the currency risk between the manufacturer
and the customer, or defining a minimum reference rate in the contract.
However, renegotiation is not easy," Prence says.
In 2023, Proexport urged the
government to take measures to offset the negative impact of exchange
fluctuations. In response, the government suspended advance profit tax
payments. For Proexport, however, structural measures are needed.
As the country prepares for EU
accession, which would be followed by the adoption of the euro, this situation
can be seen as a test for local manufacturers who will have to compete in the
broader European market.
"Companies would no longer
be able to rely on exchange rate changes to compensate for increased costs.
Competitiveness would depend entirely on productivity, quality, technology,
speed and the ability to create added value. Therefore, today's developments
are a clear warning: the model based solely on free labour and custom
processing must be transformed," Prence stressed.
At the same time, the
depreciation of the euro is good news for local traders, says Artan Gjergji,
capital markets expert and co-founder of financial education website
"Financiarisht i Pavarur (Financially Independent). However, he admits
that their impact on the economy is limited.
"Trade is the largest import
sector, operating with small margins and not adding any value in the
economy," Gjergji told SeeNews in an emailed comment last week.
Other sectors, including
construction and tourism, are also affected by the euro's depreciation,
although market dynamics have so far softened the impact.
In both the construction sector
and services, sales are mainly done in foreign currency, while costs are in
leks, but the continuous increase in demand and sales have been offsetting the
euro depreciation, Gjergji noted.
Despite continued central bank
intervention to reduce euro liquidity in the local market, the euro continues
its downward trajectory. In the first quarter alone, the central bank bought
through market interventions nearly triple of the amount in the same period
last year, 95.5 million euro. However, last week, the euro recorded a new low
against the Albanian lek, at 93.72 leks, from 94.21 leks the week prior,
central bank figures show.
As protests against the
government enter into their third month, the issue has become a hot topic of
public debate. While government critics argue that currency rates are driven by
a large inflow of informal euro, the finance ministry has firmly dismissed the
claims, attributing the lek's strengthening to an increase in tourism revenue,
remittances, foreign direct investment, exports and personal income, and
improvement of the country's external position. The central bank's governor,
Gent Sejko, has shared this view.
"The experience of other
European countries also shows that during the process of integration into the
European Union, when the economy grows and foreign exchange inflows increase,
the national currency tends to appreciate," Sejko told a parliamentary
committee earlier this month.
For Gjergji, the lek's
appreciation is disproportionate to the country's official foreign currency
inflows, suggesting that unmeasured informal inflows, especially in the
construction sector, may have contributed to the excessive supply of euros in
the domestic market.
"If we refer to official
data from the Bank of Albania and INSTAT, the sectors with the strongest growth
in the country's economy over the last few years are construction and tourism.
Although the tourism sector justifies this level of funding source from
foreigners visiting Albania (in the last two years), the construction sector
justifies it neither in the construction phase, nor in the sales phase,"
Gjergji says.
Gjergji also noted that the
overall impact of the informal flow of foreign currency in the economy gives
grounds for concern as they are related to tax evasion, unfair competition and
state capture by sources and agents with criminal activities.
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