Albanian daily news

For the first time in 20 years, the exchange rate between the euro (EU) and the US dollar has reached parity – meaning that the two currencies have the same value.

According to the official exchange rate of the Bank of Albania, one euro is exchanged at 117.57 Lek, almost at the same value as the dollar exchanged at 117.51 ​​Lek.

The euro touched 1 dollar on Tuesday, down about 12% year-to-date. Recession fears on the continent abound, fueled by high inflation and energy supply uncertainty caused by Russia’s invasion of Ukraine.

The European Union, which received around 40% of its gas through Russian gas pipelines before the war, is trying to reduce its dependence on Russian oil and gas. At the same time, Russia has cut gas supplies to some EU countries and recently cut Nord Stream gas pipeline throughput to Germany by 60%.

Now, this critical piece of Europe’s gas import infrastructure has been shut down for planned maintenance for the past 10 days. German officials fear it may not be reignited.

The energy crisis is accompanied by an economic slowdown, which has cast doubts on the European Central Bank’s ability to tighten policy adequately to bring down inflation.

The ECB announced that it would raise interest rates this month for the first time since 2011, with the eurozone inflation rate standing at 8.6%.

Regarding the effects on the Albanian economy, the sharp drop in the euro and the parity with the dollar should have an impact on the Albanian economy.

This is due to the high rate of use of European currency in the country, calculated at 50%.

A weak euro benefits all borrowers in this currency and whose income is in lek, because they will pay less in monthly payments. On the other hand, importers will benefit because they will pay less for goods and products. This should put pressure on prices, affecting a possible decline, although in the face of the crisis, this should not be significant. The government is also at an advantage, as it will pay less for the external debt.

All those who have income in this currency, families who live on remittances from immigrants, as well as exporters whose profit rate is in euros and lose at the exchange rate at the time of currency conversion, lose the weakening of the euro on the internal market. market.

But some say the ECB is way behind the curve and a hard landing is almost inevitable. Germany recorded its first trade deficit in goods since 1991 last week as fuel prices and general supply chain chaos raised the price of imports dramatically.

“Given the nature of German exports which are sensitive to commodity prices, it remains difficult to imagine that the trade balance could improve significantly over the next few months given the expected slowdown in the economy. ‘eurozone economy,’ wrote currency strategists at Saxo Bank in a recent note.

The US Federal Reserve is well ahead of Europe in tightening, having raised interest rates by 75 basis points while signaling that more rate hikes will occur this month.

This pullback to the safe haven of the U.S. dollar could become even more extreme if Europe and the United States slip into recession, George Saravelos, global head of foreign exchange research at Deutsche, warned in a note last week.

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