The Bank of Greece reports that Greece’s economy got a boost from a jump in tourist numbers during the first seven months of 2024. Increased travel activity drove a significant rise in the services balance surplus, primarily due to the travel sector, with transport and other services also contributing. Non-resident arrivals surged by 11.2% compared to the previous year, lifting revenue to 10.95 billion euros, a 5.6% increase.
Financial Challenges Amidst Tourist Gains
Despite the tourism influx, Greece’s July current account surplus fell compared to the previous year, impacted by a worsening balance of goods, services, and primary income. However, secondary income saw a slight improvement. From January to July 2024, the current account deficit rose by 1.3 billion euros year-on-year, reaching 8.6 billion euros, mainly due to a growing goods deficit driven by declining exports and rising imports. Goods exports decreased by 1.3% in current prices and 4.3% in constant prices, while imports climbed by 4.1% and 4.8% respectively.
The combined current and capital account deficit also widened year-on-year to 9.1 billion euros, signifying an increased need for external financing. During the same period, foreign direct investment saw a positive net flow under residents’ external assets of 978.1 million euros and 2.6 billion euros under external liabilities, indicating an uptick in non-residents’ investment in Greece.
Bulgaria’s Euro Adoption on the Horizon
Bulgaria gears up to switch from the leva to the euro within the next year as part of its Eurozone integration strategy, though exact dates remain uncertain. With inflation posing the main hurdle, Bulgaria entered the ERM II with Croatia in 2021. While Croatia transitioned to the euro in January 2023, Bulgaria postponed its target to 2025, and current projections suggest a delay to 2026 due to political instability.
Upon euro adoption, bank accounts will convert from leva to euros free of charge, facilitating withdrawals and benefits in euros based on a fixed exchange rate. Cash exchanges will be fee-free for six months at designated locations, ensuring a smooth transition. Despite inflation and potential economic challenges, euro adoption promises benefits such as enhanced trade, improved credit ratings, and reduced borrowing costs, though it also means less control over monetary policy and adjustment costs.
Bulgaria’s euro journey has sparked debate, with the government eyeing a late 2024 or early 2025 timeline to meet inflation targets for a revised Eurozone entry evaluation. Delays could have serious economic consequences, as seen in recent positive outlooks by rating agencies. The outcome of Bulgaria’s transition will significantly impact its financial landscape, offering growth opportunities and challenges in adapting to a broader monetary system.
