The euro has marked a strong decline in the country, which began at the end of 2016. In 2015, the common currency exchanged on average at nearly 140 lek.

In 2016, it fell to 137.4 lek. Since then, the euro’s depreciation has not stopped, reaching 119 lek in 2022 and 100.7 lek in 2024.

In 2025, the euro fell below the 100-lek threshold for the first time, with an annual average of 97.8 lek. The depreciation has continued at a slower pace this year, with an average from January 1 to July 17 of 95.6 lek.

But what are the factors that caused the euro to lose 20 lek from 2015 to 2022 (a 15% depreciation), 40 lek from 2015 to 2024 (a 28% depreciation), and 42 lek (-30%) in a decade (from 2015 to 2025)?

From analyzing official data by Monitor and conversations with market operators, it turns out that two main reasons explain this fall of the euro.

1. Construction permits and the exchange rate

First, at least until 2024, the main explanation is linked to the construction boom in the country. Construction took on larger dimensions in recent years, evidenced by the high level of construction permit area granted in total, which reached a record 2.1 – 2.7 million square meters in 2021 – 2024.

The first graph shows the inverse relationship between the growth of the construction permit area and the depreciation of the common currency for the period 2015 – 2024.

For 2025, such a comparison is impossible as INSTAT cannot fully calculate the construction permit area, because for buildings over 7 floors, permits are no longer issued by municipalities but by the Territorial Regulation Council, which does not report any data at all.

However, indirect data from infrastructure impact tax revenues show that for 2025 there has been a slight decline in the construction area, but it has increased significantly in the first 5 months of 2026.

According to official data from the Ministry of Finance, for the 5-month period, 15.3 billion lek have been collected from the infrastructure impact tax, while in the best year, 2024, collections from this tax were 18 billion lek for the entire year, or the same as in 2025 (in 2025, revenues from this item were 16.3 billion lek, a decline of 11% from 2024).

Based on these data, indirect calculations suggest that around 2 million square meters of construction may have been permitted just in the first 5 months of 2026, which are expected to become visible in the coming years. From an observation in Tirana, it is clear that what is currently being built are permits mainly granted in 2025.

SPAK’s investigations formalized the fact of how easily informal money has entered construction, even through the most basic schemes, such as transporting cash by truck.

The company that SPAK placed under investigation for links to criminal groups and money laundering, Nova Construction, increased its revenues from 181 million lek in 2017 to 4 billion lek in 2024, becoming within a few years the largest operator for residential construction, according to data from the National Business Center, which publishes balance sheets.

In 2024, the company had liabilities of 6 billion lek and capital of 1 billion lek. The debt-to-equity ratio was about 6 to 1, meaning that for every 1 lek of its own capital, the company had about 6 lek of debt, and that the expansion of activity was mainly supported by financing from third parties, not shareholder funds.

Nova reported in long-term liabilities 3.6 billion lek of obligations to third parties and no long-term loans, and in short-term liabilities 2.65 billion lek payable for operating activity and again no loans.

These data show that the company did not base its expansion on classic bank financing. The main source of financing appears to have been debt to third parties, suppliers, clients, or entities linked to the activity, depending on the detailed composition of these items.

Banks usually prefer that liabilities not exceed two to three times capital, although the limit varies by sector and company cash flows. Nova Construction’s 6 to 1 ratio signals a high level of financial leverage.

In residential construction, liabilities to third parties generally also include client prepayments, financing from partners, obligations to related companies, contractors, and suppliers, which enables the easy channeling of informal money into construction.

2. The so-called fundamentals partially explain the strengthening of the lek from 2024

The second factor that affects the exchange rate are the so-called fundamentals, which are officially often mentioned as impacting the strengthening of the lek. These imply an improvement in the current account deficit, which comes as a result of the improvement of the real economy.

The current account measures the difference between the foreign currency that enters and leaves the country through trade in goods and services, income from work and investments, the travel balance, as well as remittances from emigrants.

The country has always had a negative current account deficit, meaning that more foreign currency leaves Albania than enters, mainly related to the high level of imports and low exports, as well as the repatriation of profits by foreign companies. On the other hand, sources of foreign currency inflows are remittances, income from work, and the travel balance, with tourists bringing in currency and Albanians taking it out.

An improvement of this deficit, theoretically, should lead to the strengthening of the domestic currency. But from 2016 to 2022, the opposite happened. Although the current account deficit worsened (in 2022, a net 1.1 billion euros left the country, or 37% more than in 2016), meaning officially more currency left the country, the euro depreciated by 13% over the same period.

From 2023, the current account deficit began to improve, especially in the third quarter, due to tourist inflows, becoming an additional factor in the fall of the euro. The current account deficit dropped to 374 million euros in 2023. However, in 2024 it worsened again to 610 million euros, yet the depreciation of the common currency continued. The euro depreciated by 8 lek in 2024 compared to the previous year, a decline of 8%.

In 2025, when the euro fell below 100 lek, the deficit improved significantly, to 178 million euros, being an important factor that influenced the euro’s fall. The main effect on the deficit improvement came from tourism inflows, with the net travel balance reaching 2.7 billion euros, and remittances at 1.1 billion euros, reflecting the new emigration cycle in the country.

On the other hand, tourism demand, more than stimulating domestic production, led to the financing of imports, with the trade deficit reaching a record 5.9 billion euros! (see table at the end). /Monitor

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