Holiday Euro Winter 2007: Holiday euro abroad at lowest level, despite the strong euro and the higher inflation in Austria
- Strong euro only exerting positive impact overseas, in the UK and in Switzerland
- High inflation and appreciation against euro in many European destinations
In comparison with December 2006, Austrians' holiday euros will be worth less this year. "The currencies of major European holiday destinations have appreciated against the euro in 2007, while these countries also have higher rates of inflation than Austria" revealed Stefan Bruckbauer from Bank Austria Creditanstalt (BA-CA) Konzernvolkswirtschaft, explaining the 2 percent loss in value of the ‘holiday euro’ compared with December 2006. The value of the holiday euro has only risen visibly year-on-year for the USA and the United Kingdom.
In spite of the fall in the holiday euro to its lowest level since calculations began (1990), at 118 it is still worth more than in Austria (100). According to the economists at BA-CA, the decline in value abroad reveals the improved level of competitiveness in Austria.
The main triggers for the renewed fall in the value of the holiday euro since December 2006 were above all linked to higher inflation rates, with the added factor of partial appreciation in important holiday destinations for Austrians. This applies for Croatia, which is still the second most important holiday country, but also for Turkey and Hungary. The scale of the decline in the holiday euro was particularly noticeable in the case of Turkey with its local currency appreciation of 9 percent and an inflation rate of almost 8 percent; today the holiday euro in Turkey is worth around 16 percent less than in 2006, falling from 163 to 141 euro. Despite this drop, the holiday euro still goes furthest in Turkey at the end of 2007 in comparison to the other main holiday destinations.
Nevertheless, holiday euros are worth almost just as much in Croatia, Hungary and now also in the USA as they are in Turkey. "The renewed appreciation of the euro against the US dollar makes holidaying in the USA cheaper than ever before, and at 130 euro the holiday euro is thus worth 30 percent more than in Austria", said Stefan Bruckbauer. Nonetheless, the impact of the strong euro is significantly less positive in many other overseas destinations. While the holiday euro has risen in value in Asia, in many countries of Central and South America as well as Africa there has been no improvement thanks to inflation or the appreciation of local currencies against the euro. "Overall, the value of holiday euros overseas is not likely to have risen on average, with the exception of the USA", said Bruckbauer.
Depreciation and somewhat lower inflation have boosted the value of holiday euros in the United Kingdom and in Switzerland on a year-on-year basis, and they are worth almost as much in the UK as in Austria; Switzerland, on the other hand, remains the most expensive destination among the popular holiday countries for Austrians.
In conclusion, the BA-CA economists point out that these are average figures. Individual regions, such as London or Paris can differ considerably. The price level also refers only to the average for goods and services in the individual countries. Furthermore, the fact that the price level in a number of holiday destinations is much more favourable is mainly due to higher incomes in Austria. If the level of prices in Austria were lower, the income level would also be lower, and in many cases we would not even be able to afford holidays.
Enquiries: Bank Austria Creditanstalt Economics Department and Market Analysis
Stefan Bruckbauer, Tel. 05 05 05 Ext 41951