IOBE: 2021 Greek Economy Rebound Hinges on Covid-19 Vaccine

The Greek economy is expected to shrink by 8.0 percent this year due to the Covid-19 shock and by 10 percent if a new lockdown is imposed, putting hundreds of jobs at risk once relief measures are stopped, the Foundation of Economic and Industrial Research (IOBE) said recently.

The country’s top think tank said on Thursday, that under a baseline scenario, Greece’s economy will contract by 8 percent before it rebounds by 4.0-4.5 percent in 2021 provided the pandemic subsides and no new lockdown is imposed.

In a worst-case scenario, however, with no vaccine to the deadly virus and new lockdown measures, the Greek economy may be hit by a 10 percent slump and a forecast rebound of 2.5-4.0 percent recession.

“The geometric increase in Covid-19 infections creates concerns over the economic impact,” said IOBE President Takis Thomopoulos, not excluding a recession greater than 8 percent in 2020 and a weaker recovery in 2021.

IOBE analysts are also ringing alarm bells with regard to unemployment which they say may reach Greece’s debt crisis levels once the government stops relief measures.

According to IOBE data, without the current subsidies to companies, jobless rates would exceed 20-25 percent. Should the Covid crisis persist, unemployment is expected to increase further and faster in 2021 at 19.5- 20.5 percent.

Herod Atticus Odeon, Athens © GTP

One of the hardest hit sectors in Greece has been tourism, which is also a leading job creator and driver of the economy.

IOBE economist Nikos Vettas told Reuters that the sector “has been in a free fall with the drop in turnover reaching 64.6 percent in the first half”, affecting the current account balance, “which is nearing a 7.9 billion euro deficit in the first eight months”.

In its previous quarterly report, the IOBE had projected economic output would shrink by 7.5 percent under a baseline scenario.