The International Monetary Fund (IMF) is forecasting that the Greek economy will contract by 10 percent this year as a result of the coronavirus (Covid-19) outbreak that has devastated the world.
According to the IMF’s World Economic Outlook report released on Tuesday, Greece is seen as falling into recession this year with the coronavirus pandemic taking a 10 percent bite out of GDP against a pre-Covid-19 forecast of 2.2 percent set to rise to 2.8 percent in 2021.
At the same time, the IMF – one of Greece’s lenders during the economic crisis years – is also warning of a 5-point increase in unemployment to 22.3 percent just 20 months after Greece exited a nearly eight-year-long aid program. A slight reduction to 19 percent is expected in 2021 but not managing to reach 2019 levels.
The IMF’s report is forecasting 5.1 percent growth for Greece in 2021, with the current account deficit reaching 6.5 percent of GDP this year and dropping to 3.4 percent in 2021. Inflation is set to rise by 1 percent on average in 2021.
IMF estimates come on the back of similar projections by international ratings agencies. Earlier this week, analyst Jakob Suwalski of the Scope credit rating agency predicted a drop from 7 percent to 18 percent in GDP this year in the aftermath of Covid-19, noting that Greece faces the most serious disruption of all eurozone economies.
Additionally, an ING study also found that Greece will be the most vulnerable economy in the eurozone due to the coronavirus outbreak primarily because it is very dependent on the tourism and travel sector.
It should be noted that the coronavirus outbreak hit Greece shortly before the start of its peak tourism season and its effect is expected to continue through to September in the best case scenario. IMF Chief Economist Gita Gopinath said there was still considerable uncertainty with regard to the Covid-19 pandemic, which is currently expected to weaken towards the end of 2020.
Meanwhile, despite the devastating loss of human life in neighboring Italy and Spain, the IMF projects recession there at 9 percent and 8 percent, respectively, but with slower recovery rates in 2021 set at 4.3 and 4.8 percent.