The “Maldives of Europe” is sinking in a currency crisis

Alice Taylor


Tales from the Region



This summer saw the value of the euro fall to historic lows against the local currency, the lek, a big issue for Albania businesses that do business in Europe, or those getting paid in euro, but having to pay salaries and bills in lek.

This summer was the summer that Albania found itself catapulted to the forefront of the international tourism sector, dubbed “The Maldives of Europe” and welcoming more than 5 million tourists as of August, 50% more than in 2022, with more set to come before the year’s end. But it has not all been plain sailing in the small Western Balkan nation as its export sector is struggling and a growing number of businesses are facing bankruptcy, which is set to cause a catastrophe for the economy and households.

This summer saw the value of the euro fall to historic lows against the local currency, the lek, a big issue for Albania businesses that do business in Europe, or those getting paid in euro, but having to pay salaries and bills in lek.

Shengjin, Albania. The northern Albanian coastal town of Shengjin is a hot spot for tourists from Kosovo, a country where the official currency is the euro. Every year, thousands of Kosovars, where the euro is used, visit during the four months of the summer season, and the local currency switches from the official lek to euro. In every shop, cafe, hotel, or roadside stall selling peaches and figs, euros are the currency of preference.

Even customers paying in lek, find their change being given in euro at a rate of 1:1. Requesting a change in lek is often followed by an eye roll and reluctance. But it is not just in Shengjin where the use of the euro is de rigeur. Throughout the whole Albanian Riviera, from Durres down to Vlora and all the way to the Greek border and up to the inland capital of Tirana, euros reign supreme.

But the increase in the number of tourists and their fistfulls of euros combined with the willingness of business owners to accept them, is causing problems. Since the Spring, the strength of the euro against the lek has plummeted.

Downward spiral for the euro, heady heights for the lek

In 2016, one euro was 140 lek, falling to an average of 119 lek in 2022. But on 21 July 2023, the rate fell to just over 100 lek to the euro. At the time of writing, the rate had picked up to 106.3, but there is little optimism regarding a return to stability.

While the tourism industry is flourishing, on the surface at least, many other businesses are struggling, in particular, export businesses.

“Here, the euro is falling daily, and from the export of goods to the collection of invoices, the losses are very high. Export companies are in a big crisis because of the exchange rate”, said Laurat Mulliqi, chairman of the Association of Agricultural Products Exporters.

Exporters are filing their invoices in euro and receiving them up to 45 days later, during which time the exchange rate may have dropped significantly. This means a big loss, on top of losses they are already incurring because they have to pay their workers, taxes, bills, and material costs in lek.

Плаќање со платежна картаSource: pexels.com

Mulliqi said that some 30% of agricultural exporters went bankrupt in 2023, specifically as a result of the strengthening of the lek against the euro.

Exporters are concerned that the Albanian economy is becoming increasingly uncompetitive for manufacturing and agriculture. At a local level, to cover rising costs, bad weather that impacted crops, and a lack of labor, farmers have had to increase the prices of their goods.

Currently, prices of tomato, cucumber, melon, onion, and potato have doubled from last year, and farmers say prices are set to remain high. This has a knock-on effect on families who are already struggling with inflation and the lowest wages in Europe.

But not everyone is convinced that it is just the tourism boom behind the current situation.

Foreign investment, tourism or crime?

Central Bank Governor Gent Sejko said before summer that tourism and “the purchase of properties by non-residents” were behind the influx of extra euros into the economy. While the number of foreigners buying property in Albania, in euros, has increased, it cannot be solely blamed for the phenomenon.

“Some strengthening (of the lek) has come from non-formal economic factors or in Albanian: informal or criminal economy,” said analyst and political commentator Neritan Sejamini.

He added the government and the Bank of Albania can help resolve the issue by lowering lek interest rates, raising the level of obligatory banking reserves in the currency, increasing public spending, and lowering taxes. But this is not happening.

Typically, Albania’s exchange rate is that of a flexible regime, fluctuating up and down according to supply and demand, as is typical with a free market economy. But the current situation is believed to be artificial.

“Neither the bank nor the government are doing anything because this situation results from a deliberate economic model that could be devastating for the Albanian economy and politics a few years from now,” Sejamini added.

Gjergi Erebara, a journalist with BIRN also believes that the presence of black money in the economy is behind the current state of affairs.

In an op-ed, he wrote there are several possible solutions: a crackdown on law enforcement money funding construction and enforcement of anti-money laundering rules, but this is unlikely, he writes.

Another solution is to do nothing so the lek reaches a point where those injecting illicit funds lose money when spending euros due to the exchange rate, but this risks further eroding the economy and the already beleaguered manufacturing sector.

As for the government, at the start of the crisis, measures to manage the situation were announced including tax exemptions on profits tax for at least two years for producers that export more than 70% of their products. Additionally, a working group will be set up with the Bank of Albania, exporters, and the Association of Banks to discuss further action.

But since the announcement in May, there has been no update on any progress made.

An unbalanced economy

In terms of Albania’s economy, over the last five years, it has seen modest growth of around 3%, 1.5 percentage points less than the potential estimated by the International Monetary Fund.

Despite this, the country is undergoing a significant construction boom, and purchase prices are soaring, surpassing more than EUR 5000 per square meter in the center of Tirana and on the coast. To rent in central Tirana these days, you need at least EUR 500 with some prices surpassing EUR 1500 a month in the fashionable Blloku area.

As for inflation, in July it was 4.2% after the Bank of Albania raised the key interest rate to 3% to cope with inflationary pressures. While import prices are falling and price pressures from the domestic market are diminishing, inflation is expected to approach the 3% target in 2024.

Meanwhile, according to the World Bank, some 25% of the population live in poverty, a decrease from previous years, but a figure that could rise due to inflation and the looming currency crisis that apparently, no one knows how to solve.


Alice Taylor is the host of Inside Albania on Euronews Albania, Editor and Balkan Coordinator at Euractiv.com, and a correspondent for Albania and Kosovo for DW, BBC, ITV, and other international media.

The blog was created as part of the “Tales from the Region” initiative led by Res Publica and Institute of Communication Studies, in cooperation with partners from Montenegro (PCNEN), Kosovo (Sbunker), Serbia (Autonomija), Bosnia and Herzegovina (Analiziraj.ba), and Albania (Exit), within the project "Use of facts-based journalism to raise awareness of and counteract disinformation in the North Macedonia media space (Use Facts)" with the support of the British Embassy in Skopje.

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Alice Taylor

Alice Taylor is a British-born journalist living and working in Tirana, Albania, since 2017. She writes for Exit.al/en and is the news editor and Albania and Kosovo correspondent for EU politics and policy media EURACTIV. In addition, she covers the region for DW, BBC, and occasionally The Times, as well as media such as The Lead, Vice, Open Democracy, and Byline Times. As well as creating content, she was elected to the board of the Albanian Ethical Media Alliance for the second term in 2022 and regularly talks in local and international panels and at educational institutions on media, ethics, and journalism in the current climate. She started her career in Malta as a political and social columnist before working with the award-winning investigative platform The Shift News. Author photo: Jutta Benzenberg