The Greek economy is set to recover gradually next year and projected to accelerate in 2022, once the Covid-19 pandemic is better controlled and a vaccine is accessible, according to the Organization for Economic Cooperation and Development (OECD).
More specifically, in its latest Economic Outlook report, the OECD expects the Greek economy to contract by 10.1 percent this year citing the ongoing pandemic and restrictions which continue to weigh on services activity, exports, employment and investment.
Looking ahead, it projects 0.9 percent growth in 2021 and 6.6 percent in 2022.
Greece has managed to keep unemployment contained thanks in large parts to government job retainment and support measures which have prevented dismissals and reduced job seekers.
This year, unemployment is estimated at reaching 16.9 percent from 17.3 percent in 2019, and expected to rise in 2021 to 17.8 percent. OECD analysts estimate it will drop again to 17.2 percent in 2022.
Weak tourism activity is undermining recovery
One of the key factors “undermining” recovery is Greece’s heavy reliance on tourism, the OECD notes.
Despite a rebound of domestic consumer and services activity in May and June, when Covid-19 restrictions were lifted, the number of tourist arrivals to Greece were down despite re-opening to travelers.
The sector’s weak performance has weighed heavily on demand, turnover, employment and exports, the report said.
In Q3 2020, accommodation and food service firms’ turnover was 50 percent lower than a year earlier reducing domestic demand and contributing to notable drops in turnover in industry and wholesale and retail trade.
At the same time, it has taken a serious toll on jobs. As one of the largest job creators in the country, low tourism activity weighed heavily on employment.
Looking ahead, OECD analysts note that Greece’s economic recovery hinges on addressing long-standing challenges and at the same time moving ahead with targeted income support, upgrading skills and improving investment climate.
Proposed actions include increasing tax and payment compliance; strengthening banks’ capital and ability to finance investment for recovery; introducing measures to help activity move towards tradable and higher-innovation sectors; improved active labor market programs, and education and professional training which would ensure that job seekers have the skills to meet post-Covid-19 crisis demands.