Journal of Business & Financial Affairs

The Influence of the Greek Economic Crisis on FYROM Exports

Abstract

Ljupco Davcev and Nikolas Hourvouliades

According to the contemporary political and economic conditions, there is still an existing possibility for Greece to exit the Euro zone. If this scenario comes true, it will further decrease FYROM imports from Greece, as this will most probably result in the return of the Drachma with an assumed 50% devaluation to the Euro. On the other hand, FYROM exports Greece will become equally more expensive. The economic crisis which currently trembles our neighbour Greece has emerged as a new variable in the prediction and planning of economic activity along with main economic variables in the Macedonian economy. Analysis of the economic and trade relations between Greece and FYROM shows a steady decline during the last five years. FYROM exports to Greece in the first quarter of 2012 are at the lowest level in the history of trade relations between the two countries, at €39m. Even worse is that the coverage of imports from Greece with exports from FYROM is only 25.2 basis points, which is also at the lowest historical level. This is a clear indication that FYROM is losing Greece, neighbouring country and EU member, as a significant business partner. This paper is trying to determine the potential effects on Macedonia economy due to the contemporary Greek crisis, taking into consideration that our neighbour is one of the largest investors and trading partners of FYROM.