Greek-Bulgarian economic relations

Good bilateral relations between Greece and Bulgaria have helped realize the Burgas-Alexandroupolis oil pipeline agreement, which is due to be officially signed by Greece, Bulgaria, and Russia in Athens this March. The long-awaited agreement will initiate the construction and operation of an oil pipeline linking the western Black Sea coast with the northeastern Aegean—a route bypassing the increasingly congested Bosporus straits.  This undoubtedly represents a geopolitical success for both Greece and Bulgaria, and furthers Greece’s efforts to become a regional energy hub.  Both countries hope to gain additional clout within the region and the EU by creating a so-called ‘Balkan nucleus’ with Romania, following the recent accession of Bulgaria and Romania to the EU in January. 

In recent meetings between President Papoulias and Bulgarian President Georgi Purvanov, discussion has led to talks of opening new crossing points on the Greek-Bulgarian border to improve bilateral commercial relations on all levels. Both sides agreed that several potential areas of cooperation remained unexploited, such as in tourism. President Purvanov said the two sides could also cooperate in the defense industry and in civilian protection.

Financial data further supports politicians’ claims of a ‘golden age.’  According to external trade data for both countries, Bulgaria has become Greece’s third-largest trading partner (according to temporary data from the Greek Statistical Service for January to September 2006) and Bulgaria the fourth-largest trading partner to Greece (according to the Bulgarian Statistical Institute). In 2006, 6.9% of total Greek exports went to Bulgaria (up from 6.34% in 2004), while imports from Bulgaria represented1.6% of total Greek imports, according to Greek statistical data. On the Bulgarian side, imports from Greece represented 4.9% of total imports (down from 5.7% in 2004) while exports to Greece represented 8.9% of total exports. Furthermore, Greece is the third-largest foreign direct investor in Bulgaria, following an increasing trend of investments in the country, most of which originate from the Netherlands, the UK, and Ireland. Most foreign direct investment (FDI) in Bulgaria between 2005 and 2006 was in real estate and land development.

Prior to1997, Greek investment in Bulgaria totaled just $40.8 million, or on average $8.2 million annually. A slight increase in investments occurred between 1997 and 1999, with on average an investment of $10 million each year. However, from 2000 onwards there has been a large volume of Greek investment totaling 1.4 billion EURO, or on average more than 200 million EURO annually.  During the same period, the value of exports has doubled, resulting in a 50% increase in trade volume and a positive surplus. This period has witnessed an acceleration of investment from groups in the services, trade, and technical project sectors.

According to data for total investments in Bulgaria, Greece has a 10% market share in FDI, which in reality could be even higher. Consequently, it is safe to conclude that Greece has contributed to a large extent to the economic development of contemporary Bulgaria. This can be easily understood by looking at the banking sector’s market share data. Greece, through Greek banks, holds 20.6% of total capital for the Bulgarian banking sector, which will reach 23.6% once the agreement to buy out one more Bulgarian bank has been finalized.

The general conclusion drawn from this analysis is that Greek market share in Bulgaria, from the time of its accession to the European Union, remains very satisfactory. Despite intense competition—both from within the EU and externally—all signs are encouraging, ranging from increased investment from traditional sectors of the Greek economy to new sectors, such as construction (from technical companies for infrastructure projects) and the market for technical consultants, which is expected to flourish in Bulgaria due to the resources from structural funds that are expected to be channelled into the country.

Source: Greek National Statistical Service, ELKE.

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