Greece's Economic Turnaround: Narrowing Current Account Deficit Signals Opportunity in Equities and Bonds

The narrowing of Greece's current account deficit—a key indicator of external financial health—has emerged as a bright spot in the country's economic recovery. From a record low of -21% of GDP in 2007, the deficit dipped to -11.8% in late 2024, signaling a structural shift toward greater stability. This improvement, driven by surging tourism revenues and a partial stabilization in trade dynamics, is reshaping investor perceptions of Greece's macroeconomic prospects. For investors, the question is whether this trend can endure—and where to find opportunities in equities and bonds.

The Tourism Engine: A Key Driver of Deficit Reduction

Greece's tourism sector has been the linchpin of its narrowing current account deficit. In 2024, tourism generated an €18.9 billion surplus, the highest since the pandemic, offsetting 53% of the goods trade deficit. Travel receipts rose to €21.7 billion, a 5.4% year-on-year increase, despite a 5.1% decline in average spending per traveler. This reflects a strategic pivot toward high-spending markets:

• U.S. tourists spent €1,034 per capita, contributing €1.58 billion despite a 10% increase in arrivals.
• Germany, Greece's largest visitor market, generated €3.7 billion from 5.4 million arrivals.
• Non-EU markets, particularly the U.S., saw explosive growth, with December 2024 receipts surging 117% year-on-year.

Crucially, off-season tourism is expanding, with January-March 2024 receipts up 40% compared to the previous year, signaling a move away from reliance on summer peak season. This diversification reduces seasonal volatility and strengthens the services surplus.

Trade Dynamics: A Mixed Picture on Imports and Exports

While tourism has been a clear bright spot, Greece's goods trade deficit remains a challenge. In 2024, imports outpaced exports by €35.6 billion, up from €32.4 billion in 2023, driven by energy costs and investment-related purchases. However, the deficit's % of GDP has stabilized, thanks to GDP growth outpacing the absolute deficit.

Importantly, export volumes have stagnated, with March 2025 exports falling 8.4% year-on-year. This suggests structural weaknesses in manufacturing and agriculture persist. Yet, the services surplus is growing fast enough to offset some of these trade imbalances.

Implications for Creditworthiness and Investor Confidence

The narrowing deficit reduces Greece's reliance on external financing, a critical improvement after years of austerity and debt crises. This has already translated into lower bond yields:

• Greek 10-year government bond yields have fallen from 12% in 2012 to 2.8% in early 2025, reflecting improved creditworthiness.

Investor confidence is further bolstered by a projected 2.3% GDP growth in 2025, fueled by tourism-driven FDI (which hit €6 billion in 2024) and EU Recovery and Resilience Plan (RRP) investments in infrastructure.

Investment Opportunities: Equities and Bonds to Watch

Tourism-Linked Equities:
Hotels, cruise infrastructure, and real estate in popular destinations like Crete and the Peloponnese are poised for growth. While specific stocks aren't tracked in the data, sectors like cruise ports and eco-tourism developments are strategic bets.

Greek Government Bonds:
Lower yields and improving credit ratings make Greek debt an attractive “catch-up” trade. The spread between Greek and German 10-year bonds has narrowed to 2.3%, down from over 1,000 basis points in 2012, offering value for yield-seeking investors.

Risks and Caution Flags

• Trade Volatility: The goods deficit remains large, and export weakness could reignite imbalances if tourism falters.
• Geopolitical Risks: Russia's tourism collapse (down 97.5% since 2019) and energy cost spikes threaten margins.
• Labor Shortages: Unemployment has fallen to 9%, but skill gaps in hospitality and construction could constrain growth.

Conclusion: A Fragile but Encouraging Turnaround

Greece's narrowing current account deficit is a significant step toward economic self-sufficiency. Tourism's dominance has created a critical counterweight to trade deficits, while lower borrowing costs ease fiscal pressures. However, investors must remain cautious: structural reforms in manufacturing and energy are still needed, and geopolitical risks loom large.

For now, the best opportunities lie in tourism-related equities and Greek government bonds, which offer asymmetric upside as the country's economic narrative improves. Yet, the journey to a sustainable surplus is far from over.

Stay informed, stay cautious—but don't overlook Greece's comeback.

This article synthesizes data on Greece's economic indicators to provide actionable insights for investors, balancing optimism with realism.