The strengthening of the Lek is increasing the profits of foreign investors in Albania

The strengthening of the Lek is also increasing the profits of foreign investors in Albania.

The data of the Bank of Albania show that the income of foreign investors from investing in Albania for the 6th month of 2023 reached the value of 461 million euros, an increase of 14% compared to the same period a year ago.

This amount represents the distributed or reinvested profits of foreign investors in Albania for the period and this year has marked the highest historical level.

In the opposite direction, the incoming flows of income from investments for the first half of this year increased to 89 million euros, 62% less compared to the same period of the previous year.

However, the net balance of investment income was largely negative in the amount of 372 million euros. The deficit in this item increased by 6.6% compared to the previous year. Given that foreign investments in Albania are much larger than Albanian investments abroad, clearly the net balance of investment income has historically been negative.

The increase in the profits of foreign investors in recent years can be related to the rapid recovery of the economy after the pandemic, which has brought positive effects for foreign companies operating in Albania. But, undoubtedly, a good part of the increase can be attributed to the strengthening of the Lek in the exchange rate with the Euro. In the middle of this year, the Euro-Lek exchange rate was down by 10.7% annually.

Among the actors who have benefited from the fall of the Euro in the exchange rate, there are also foreign investors.

Foreign companies generally provide their income in Lek, while they distribute profits to shareholders in foreign currency. The strengthening of the Lek has caused the same amount of local currency to be translated into a higher value in foreign currency, mainly in Euro.

Since a good part of the profits are not distributed, but reinvested, the strengthening of the Lek, indirectly, has also influenced the growth of foreign investments in recent years.

Reinvested profits in recent years have taken the main weight in the structure of foreign direct investments.

For the first half of this year, the value of profits reinvested by foreign enterprises reached 376 million euros, almost 12% more compared to the same period last year. Reinvested profits accounted for 55% of the total value of foreign direct investments for the 6th month of 2023./ MONITOR