Continuous measures to address Covid-19 are expected to weigh on Greece’s recovery, said the European Commission this week, forecasting real GDP growth by 3.5 percent in 2021, before rising to 5 percent in 2022.
For 2020, the Commission estimates Greece’s real GDP to be down by 10 percent.
More specifically last year, the country’s GDP grew by 2.3 percent in Q3 2020 after the government reopened the economy and eased restrictions allowing for domestic demand to pick up.
Meanwhile, the impact of the pandemic on tourism, one of the country’s main economic drivers, sent economic activity plunging in the services sector.
Construction demonstrated some resilience, the report found.
At the same time, new lockdown measures in Q4 are expected to lead to negative output growth in quarterly terms.
According to Commission analysts, Greece’s recovery will be supported mainly by private consumption. Key to this is reopening retail trade, improving consumer confidence, and setting supportive fiscal policy in the economy.
Net exports are also expected to contribute positively to growth in 2021 and 2022 as will the return of tourists to Greece as long as vaccination campaigns proceed swiftly.
Investment is expected to recover at a slower pace with support measures bolstering credit growth to businesses.
According to the report, the impact of the Covid-19 health crisis on labor remains relatively contained. Unemployment in Greece stood at 16.7 percent in October 2020, similar to a year before as a result of fewer recruitments in the tourist sector
After dropping by 1.3 percent in 2020, Harmonized Index of Consumer Prices (HICP) inflation is forecast to remain negative in 2021 before turning positive in 2022, the Commission said.
Recovery in Greece, the Commission stresses, hinges on the effective rollouts of vaccination campaigns which will allow the restart of tourism. How fast the private sector improves after relief measures end is also a crucial factor.
The Commission adds that the migration crisis also adds to the uncertainty.
On a positive note, the Commission forecast has not incorporated the effect of the Recovery and Resilience Plan, which could “provide a significant boost to domestic demand once implemented”.