The reduction of the current account deficit by nearly 2 billion euros during the first 11 months of 2004 underscores the leading role the service sector, or at least part of it, can play toward balancing Greece’s international transactions, according to the latest report of the Institute of Tourism Research and Forecasts (ITEP).
The latest current account figures highlight the great importance of two sectors, tourism and shipping, to the country’s international transactions, in addition to their positive role in boosting income, employment and regional development.
Between January and November 2004, Greece’s services surplus widened by 3.711 billion euros, of which 3.373 billion is attributable to tourism and shipping and 338 million to other service sectors.
Thus, the two sectors, tourism and shipping, accounted for 72.8 percent of the improvement in the invisibles balance, despite their neglect by economic policy planners.
As for the tourism sector, the report claims that Greece’s obvious natural and cultural advantages notwithstanding, it has the “misfortune” of operating in a state that has almost abandoned any notion of development strategy and whose interventions often produce worse results than its customary neglect and inertia.
The declining competitiveness of Greek goods, both in manufacturing and agriculture, is evident in the widening trade deficit which, in recent years, has reached 15 percent of the country’s GDP. However, thanks to tourism, and a particularly favorable period for shipping over the past two years, the current account deficit has been limited to between 4.2 and 5.6 percent of GDP.
ITEP warms that the tourism sector will not be able to contribute to the containment of the current account deficit for long if it doesn’t improve its results relative to its competitors. In the past couple of years, Greece has been the only one of the major eurozone tourist destinations that has not improved its turnover. Additionally, eurozone countries are at a disadvantage due to the euro’s strength. The recent marketing campaign may be, at least in terms of money spent, unprecedented for Greece but its effectiveness does not depend just on sums spent. Managing the campaign is a crucial matter, although at least this can be improved in the short term, whereas the improvement of infrastructure is a long-term task.