National currency should reflect the real economy

The Strengthening of the Albanian Lek in Recent Years, mainly driven by high foreign currency inflows through tourism, remittances, real estate transactions, and capital movements, has been widely interpreted as a sign of macroeconomic stability and confidence in the Albanian economy.

The strengthening of the Albanian lek has brought monetary stability, but at the same time has exerted pressure on productive and exporting sectors, highlighting the gaps between monetary policies and developmental objectives.

This economic opinion analyzes the effects of the exchange rate on the real economy and emphasizes the need for a more coherent approach in macroeconomic policies that support competitiveness and domestic production. Exporters are not seeking privileges, but fair mechanisms that reflect the economic reality and promote sustainable growth.

At the core of this concern lies a structural mismatch.

The value of the national currency appears increasingly detached from the economic foundation of the sectors that generate sustainable and productivity-based growth.

The consequences are not abstract—they are real and immediate for Albanian manufacturers, agro-processors, and industrial exporters.

Strong Currency, Weaker Productive Sector

While a strong lek helps importers, lowers the cost of servicing foreign debt, and mitigates inflationary pressures, it simultaneously significantly harms the competitiveness of domestic producers operating in international markets, while facing rising costs in the domestic market.

For every euro earned abroad, exporters receive fewer lek, narrowing margins and limiting the ability to reinvest.

This effect particularly impacts sectors with low price flexibility and high exposure to regional and global competition.

Despite efforts toward modernization and integration into European supply chains, exporters report increasing difficulties in maintaining capacities and jobs under current exchange rate conditions.

Structural Drivers versus Policy Gaps

The strengthening of the lek does not stem from a structural increase in productivity within the productive sectors, but mostly from foreign currency inflows tied to non-productive sectors or sectors that do not create added value within the country.

In this sense, although the exchange rate is free-floating, it does not reflect the reality of productive sectors, but is influenced by short-term or speculative movements.

The situation is worsened by the lack of compensatory fiscal instruments.

Albania still does not apply mechanisms that mitigate the loss of competitiveness, such as tax credits for exporters, accelerated VAT refunds, or targeted support schemes.

Moreover, there is a lack of a coordinated framework that links monetary, fiscal, and development policies into a single strategy for economic transformation.

Lessons for a Coherent Approach

What is being proposed by exporters this early summer is not manipulation of the exchange rate or abandonment of the free market. On the contrary, exporters seek coherence between macroeconomic instruments and long-term developmental objectives.

A more balanced approach could include:

• Clearer communication and coordination between the Bank of Albania, fiscal authorities, and development agencies to assess the impact of the exchange rate on strategic sectors.
• Selective compensatory mechanisms for sectors with export potential that are highly sensitive to currency fluctuations.
• The creation of productive credit lines, fiscal incentives for export-oriented investments, and encouragement for research and development.
• A gradual shift toward a growth model based on tradable goods and innovation, instead of consumption and non-productive sectors.

Albania’s macroeconomic stability has been recalibrated to a new balance over the past two or three years, but the potential for long-term development depends on the resilience of the productive base.

A policy environment that rewards short-term flows at the expense of sustainable capacities risks deepening structural weaknesses and accelerating de-industrialization.

To avoid this, the exchange rate policy—though free—must be included in a broader strategic vision that supports and strengthens the sectors that bring sustainability, exports, and quality employment.

Exporters should not seek artificial protection. They should seek predictability, coherence, and political attention in line with the role they play in the country’s economic development.