July 13 (SeeNews) - Refineries in Croatia, Romania and Hungary could benefit from continued political and economic instability in Greece, as this could prompt petroleum-importing Balkan economies to turn away from the Greek market, ING Bank said.
"Assuming a slowdown in economic activity in Greece or, at worst, a disruption due to a lack of trade finance, these four countries [Montenegro,Macedonia, Serbia and Bulgaria] should not have to look far for alternatives, as Croatia, Romania and Hungary would stand ready to benefit from the extra regional demand," ING Bank said in its "The Balkans/Greek-ache from a trade perspective" report published on Friday.
Montenegro and Macedonia depend on Greek imports to cover more than half of their refined petroleum needs, while Serbia and Bulgaria satisfy their import needs with a quarter of Greek petroleum products, the report said.
Moving on to the possible effect of the Greek crisis on other sectors of the economies in the region, ING said a disruption in food imports could rapidly fuel inflation.
As much as 5.2% of total Balkan food imports come from Greece, with by far the greatest amount going to Albania and Bulgaria, accounting for 20% and 10% of total food imports, respectively.
"That being said, with the Russian food embargo set in stone at least until January 2016, food is not in shortage in the EU and hence the affected countries should easily be able to find substitutes to satisfy their import needs, potentially to the benefit of Romania, Serbia or the domestic markets," ING noted.
In terms of Balkan exports to Greece, the overall impact looks limited. The main Balkan export product going to Greece is apparel, accounting for almost 10% of total exports from the region. The Balkan countries export similar amounts of refined petroleum products (9.3% of total) and iron and steel (8.6% of total). However, export importance of refined petroleum diminishes to 1% of the total when excluding Romania and Croatia.
Bulgaria, the Balkan country with the strongest trade ties to Greece with 6.7% of total exports, has three sectors where the Greek export market accounts for a quarter or more of total exports, namely dairy, cereal and electricity. Romania, although far less exposed to Greece (1.4% of total), would also see its dairy sector come under pressure as more than 20% is directed towards the Greek consumer. However, the dairy sector is not particularly important for Romania and Bulgaria, as it accounts for only 0.1% and 0.4% of total GDP, respectively.
Tobacco industries in Albania and Macedonia are the most exposed in the region, but Greek smokers are expected to keep on smoking despite an economic slowdown, thus limiting any impact on Balkan tobacco exporters, the report also said.
Overall, the most exposed sector with the highest GDP weight is the apparel sector, which is especially important for Bulgaria, Macedonia and Albania. The exporting industries of Montenegro and Serbia appear to be the least exposed to Greek developments and Romania would qualify for the same conclusion if looking beyond the dairy sector.
In conclusion, even though the banking sector in the Balkans still looks vulnerable with 12-25% of assets held by cash-hollow Greek-controlled banks, the Balkans seem far less vulnerable from a trade perspective, with only 2.5% of total exports going to Greece, or less than 1% of GDP.