Foreign direct investments reached a new historical record for 2023. According to data from the Bank of Albania, FDI reached a value of Euro 1.49 billion last year, an increase of 8.7% compared to the previous year. However, growth was significantly slower compared to 2022's 33% level.

Meanwhile, the last quarter of 2023 marked a record value in terms of quarterly investment flows. For the fourth quarter of the year, foreign direct investments were estimated by the Bank of Albania at Euro 402 million, with an annual increase of 3.6%.

The injection of new capital reached Euro 191 million euros, with an annual increase of 4%. While the reinvested profit category expanded by 13% in annual terms and reached the value of Euro 226 million.

It is the reinvested profits that have been the most determining factor in the record figures of foreign investments during the past year. According to the Bank of Albania, for the entire year 2022, the reinvested profit reached Euro 803 million, or almost 54% of the total foreign direct investments.

In recent years, reinvested earnings have outpaced new flows of foreign direct investment. However, the increase in reinvested profits is also partially affected by the performance of the exchange rate. While new foreign investments generally come in foreign currency, the reinvested profits of foreign companies are figures reported in Lek, which are converted into Euros, which is also the currency in which the Balance of Payments is reported for statistical purposes. The significant increase in the share of reinvested profits in the structure of foreign direct investments can be partly explained by the strengthening of the Lek in the exchange rate.

In this way, the strengthening of the Lek seems to have created a vicious circle, statistically affecting the increase in the value of foreign investments.

Even this year, foreign exchange inflows from foreign investments have widely exceeded the value of the current account deficit.

According to the Bank of Albania, during the fourth quarter of 2023, incoming foreign exchange flows in the form of foreign direct investments were mainly concentrated in real estate, to the extent of 26%, the financial intermediation sector, to the extent of 17%, in the hydrocarbon sector, to the extent of 16%, in the energy sector, to the extent of 10%, and the extent of communication, to the extent of 4%.

These data confirm the high weight that the real estate sector has gained in the structure of foreign investments. Demand from non-residents is estimated to have largely supported the increase in real estate prices, especially in coastal areas.