Tourism or euros in rooms? The European currency has lost nearly 35% of its value since 2016

Although the busiest tourist season ended some time ago, the euro has continued to fall in November and is once again approaching its all-time low on the domestic market.

The Bank of Albania’s official exchange rate shows that today one euro was exchanged for 90.72 lekë, or 0.03 lekë less than the previous day.

The single currency is now just 0.08 lekë above its record low of 90.64 lekë, recorded on October 22 this year.

The difference becomes clearer if we go back to 2016, when the Lek began a prolonged period of strengthening. On January 18, 2016, according to the Bank of Albania, the euro reached 139.48 lekë, its highest exchange rate that year.

Compared with today’s rate, it has lost 48.76 lekë, or nearly 35% of its value against the Lek.

In January 2016, one thousand euros could be exchanged for around 139,500 lekë. Today, the same amount gets you only 90,700 lekë: a difference of 48,800 lekë.

For years, official institutions have attributed the Lek’s strengthening mainly to the growth of tourism, foreign investment and improvements in underlying economic fundamentals.

However, the euro’s depreciation began before the tourism boom, and some of the developments are not easily explained by official indicators.

This can be seen in the Bank of Albania’s balance of payments data, which track currency inflows and outflows from sources such as remittances, tourism and foreign trade.

From 2016 to 2022, before the current tourism boom, the current account deficit widened while the euro continued to lose value. The main cause of the deterioration was the trade deficit: the country relied increasingly on imports, while exports were hit by the euro’s decline.

In 2022, net currency outflows reached around 1.1 billion euros, 37% above the 2016 level; over the same period, the euro had depreciated by around 13%.

Under normal circumstances, a widening external deficit would increase pressure on the domestic currency and weaken it. In Albania, by contrast, the Lek strengthened.

At least through 2024, the latest year for which precise data on construction permits are reported, the euro’s decline appears to be more closely linked to the increase in construction permits than to the number of tourists.

INSTAT reports that from 2021 to 2024, the floor area covered by construction permits reached record levels, ranging from 2.1 million to 2.7 million square meters per year. At the same time, the euro continued to depreciate: from an average of 137.4 lekë in 2016 to 119 lekë in 2022 and 100.7 lekë in 2024.

The impact of tourism inflows on improving the balance of payments became evident only in 2023, when the current account deficit fell to 374 million euros.

A year later, the deficit rose again to 610 million euros, while the euro lost a further 8% against the Lek. Only in 2025, when the deficit narrowed to 178 million euros, did tourism inflows become a more significant factor supporting the strengthening of the domestic currency.

For exporters and businesses that receive payments in euros, the European currency’s decline has reduced revenues when converted into lekë, while domestic expenses, particularly wages, continue to rise. Consumers, meanwhile, have not benefited to the same extent from lower import costs.

Ten years after this decline began, the question remains how much of it can be explained by tourism and real economic factors, and how much is linked to currency flows that official statistics do not fully capture.