PRESS RELEASE
Questions and answers at the Governor's Press Conference, 05.07.2017

Question: In a press release, the Konfindustria held the Bank of Albania responsible for not intervening in the money market. According to them, the high depreciation of the euro and an artificial appreciation of the Albanian lek was a result of the informality in the spending of political parties during the election campaign. Was there any issue/problem?

Governor: We follow a free-floating exchange rate regime. The Bank of Albania intervenes in the market when the indicators require it. Currently, the Bank of Albania considers there is no need for market intervention in order to influence the exchange rate.

During this period, the lek has appreciated against the euro. The Bank of Albania has provided some explanations, and I would like to take this opportunity to explain it once again. Based on the data, the euro supply has increased; always referring to the official data available at the Bank of Albania.

The trade exchange with abroad has been in positive terms. The balance of trade and financial exchanges with partner countries has been improving, thus increasing the euro supply. Foreign investments inflows also increased, especially in the first quarter of the year, but also for the five-month period of 2017. FDIs net inflows were EUR 174 million in the first quarter, about EUR 26 million higher from a year earlier. Exports in goods and services amounted to EUR 772 million, or up EUR 163 million from a year earlier. Net income from portfolio investments (government external borrowing, etc.) was EUR 126 million compared to Euro 106 million outflows in the previous year, so the effect was EUR 232 million. Thus, the figures prove that there is a large supply of the euro. Tourism has also contributed to this performance. The electoral situation has not generated major uncertainties regarding tourism flows, which have increased after the elections.

The currency in circulation always creates the demand-supply of the foreign currency and the Albanian lek and does not avoid informality. However, the Bank of Albania, as an institution, refers to the set of available data, which proves to us that there is an increased supply, related to these factors. This has led to the strengthening of the domestic currency against the euro. As a result of the historic cycle of the strengthening of the domestic currency and due to tourist inflows, during summer, the euro will probably weaken. However, I once again highlight that the exchange rate is determined by the demand and supply in the market and is unpredictable. No one can predict how the exchange rate will be. The Bank of Albania is carefully analysing and taking into consideration all the factors that have already affected and will continue to affect the exchange rate. This is our duty and we will intervene in the exchange rate only when there would be a divergence from our parameters. For now, it is not in our plans.