ECONOMY

Strong euro could hurt tourism

Greek industrialists expect a strong euro to have only a slight impact on exports but other key sectors like tourism and shipping see a more negative effect, industry officials said yesterday. While the rising euro helps contain the cost of dollar-priced imports like oil, it is also likely to send tourists to cheaper destinations and hurt dollar-denominated shipping revenues, they said. Greek industry accounts for roughly 12 percent of gross domestic product, while tourism is an estimated 16 percent of the economy. A recent rally in the euro has pushed the currency close to historic highs against the dollar, trading around $1.29-$1.30, as the foreign exchange market factors in an end to the series of recent US interest rate increases. By contrast, the European Central Bank, which raised interest rates by 25 basis points in both December and March, is widely expected to raise rates further in June. «There will be problems for export-oriented companies who price their goods in dollars, but for firms that import raw materials in euros, it will be positive,» said George Mylonas, president of the Federation of Northern Greek Industries. «For companies that both import and export products in euros, the recent strength will not be a problem,» he added. Greece’s exports of goods exceed 15 billion euros per year, which, despite a continual rise since 2003, is still considered very low among EU members. Roughly half of exports – mainly agricultural products and minerals – are sold to other eurozone countries or to countries with currencies linked to the euro, like the Balkans. Trade effect «On the margin, the stronger euro has a negative effect on Greek exports. But some 40 to 50 percent of Greek exports go to other eurozone countries, so they won’t really be affected,» said Platon Monokroussos, an economist at EFG Eurobank. He said in trade-weighted terms, the euro had only increased some 1.8 percent since the start of the year, given the increases in other currencies like the yen or the yuan. Greece’s services-oriented economy relies heavily on tourism and shipping – its two biggest foreign exchange earners. Service exports are more than 23 billion euros a year. Sources in both industries said the recent rise in the euro would have a negative impact on them. «When the euro gets more expensive, it means tourists outside the eurozone decide not to come to Europe and it makes non-European destinations cheaper,» said George Drakopoulos, president of the Association of Tourist Enterprises. He said the stronger euro could make other Mediterranean countries – like Egypt, Morocco or Tunisia – more attractive to holiday makers seeking sun and sea. About 45 percent of tourists visiting Greece are from countries outside the eurozone. Likewise, Greek shipping companies will feel the pinch, industry sources said. Over 80 percent of world shipping contracts are denominated in dollars, but running costs like office staff and administration are denominated in euros. «The very strong euro will have an impact,» a Greek shipping industry source said. «At least 50 percent of running costs for a Greek shipping company are in euros, so of course it is a problem. But then, that is the nature of our business and one of the risks in our industry.»