The European Commission revised down its initial growth forecast for Greece to 9 percent in 2020 due to the impact of the coronavirus (Covid-19) pandemic on the country’s major economic drivers: tourism and exports.
The Commission now estimates that the Greek economy will see a partial 5 percent rebound in 2021 and a 3.5 percent recovery in 2022 (without figuring in relief funding).
In its Autumn 2020 Economic Forecast, the Commission focuses on the tremendous impact of the coronavirus pandemic on Greek tourism, which recorded a 65-71 percent decline in incoming traveler traffic and an 80 percent drop in overnight stays, creating a domino effect on GDP and employment. Tourist arrivals are expected to only partially recover in 2021 and 2022, the Commission said.
Overall, Greece is expected to see less than 30 percent of normal tourism activity this year.
Exports, meanwhile, also dropped by 32 percent year-on-year, one of the largest declines in the EU. Net exports are expected to contribute negatively to GDP growth in 2020, but set to turn positive in 2021 and 2022.
EU analysts expect the Covid-19 impact – on the back of a previous nearly 10-year-long debt crisis – to propel Greece’s public debt to 207 percent of GDP, set to drop in 2022 to roughly 195 percent.
Unemployment, meanwhile, is expected to reach 18 percent in 2020, the report said, adding that partial rebound in 2021 and 2022 should help contain the jobless rate below 17 percent in 2022.
Inflation is projected in the negative at -1.3 percent in 2020 before partially recovering in 2021 and 2022.
The report highlights the uncertainty created by the Covid crisis, particularly with regard to the tourism sector, travel restrictions, and the ability of companies to withstand the disruption. Additional risks include geopolitical tensions in the region and migration pressures.
On the positive side, the report notes that Greece is set to benefit from the substantial amount of funding coming its way via the Recovery and Resilience Facility, which is expected to stimulate domestic demand as are additional fiscal measures presented in the draft budget.
The Commission goes on to praise the Greek government for its “swift policy response” which helped cushion the impact on employment and businesses so far.
The country is set to enter a second lockdown tomorrow as the number of confirmed Covid-19 cases in the last 24 hours came to 2,917 bringing the total to 49,807 and 702 deaths.