The surprising strength of Albania's Lek

If asked at the start of 2023 which global currencies would perform the best during 2023 few if any Emerging Market investors – or anyone else, including policymakers – would have identified Albania’s Lek as a key contender. It is hence all the more surprising that just over 9 months into 2023 Albania’s Lek ranks in 6th place of 150 currencies in Bloomberg spot performance rankings.

Perhaps unsurprisingly, the country’s strong currency and macroeconomic performance is increasingly attracting international investor attention in its local currency, the domestic government bond market. Against this backdrop RBI Group Capital Markets made a visit to Tirana during July to meet with local officials and as importantly Raiffeisen Bank Albania to ensure RBI Group can effectively facilitate international investor access to domestic capital markets.

So, what’s driving Albania’s stellar performance? From a short-to-medium perspective the surge in tourism revenues forms a key part of the positive story. From a medium-to-long-term perspective, Albania and other Western Balkan countries’ reinvigorated EU accession prospects provides increasing reform and governance visibility.

Tourism revenues are surging not only because of top-down factors such as global or regional post pandemic demand resurgence, but also because of an ongoing deepening and broadening of Albania’s tourist offering. In practice this means:

1. That Albania’s tourist season is lengthening and is gradually becoming year-round.
2. The number of destinations being visited by tourists is increasing as we can see for example on Albania’s official tourist website.
3. The breadth of accommodation is growing (along with tourism margins). For a deeper dive on Albania’s macroeconomic prospects, we would also recommend a look at the recent report by Raiffeisen Albania’s Head of Research, Fjorent Rrushi and team.

What was our experience of Tirana in practice? Hearing about improving international visitor prospects from officials can sometimes seem a world away from what we experience ourselves on business trips. This was not the case in Tirana, however. Despite the mercury regularly topping 37°C when we were there, we enjoyed our stay in the city and rank the quality of food amongst the best in the CEE/SEE region.

Looking further ahead, EU accession provides a key source of long-term visibility to Albania’s economic reform, governance and rule of law path. Focus is now on 2030 as an accession date. Our meeting with the EU Delegation in Tirana highlighted the number of moving parts to actually make this happen both from a top-down EU reform and bottom-up Albania legislative perspective, however.

How does RBI Group fit in? Raiffeisen Bank Albania is the 3rd largest bank in the country by assets and the leading participant in the FX and secondary domestic government bond markets. This not only puts the bank in a strong position to facilitate domestic customers as the sophistication of domestic capital markets develops, but also means the group has an advantage when supporting international clients in their Albanian business. Besides, it is worth mentioning that RBI is the only international custodian providing the full range of securities services via its direct access to Bank of Albania, the Central Securities Depository for domestic government bonds. With this set-up, RBI Group covers the entire value chain from trading to post trade ensuring a superior customer experience.

The bottom line: Albania is not only increasingly on global tourists’ maps, but will progressively also move onto global investors’ maps.

Find more on Raiffeisen Research: Read More