The Greek economy is expected to plunge into the biggest recession in the entire EU in 2020 amounting to 9.7% of GDP, according to the European Commission’s Spring Economic Forecasts published yesterday. For 2021, growth is expected to reach 7.9%, but GDP will not be able to fully recover from this year’s hit.
Overall, the Commission warns of a “deep and uneven recession”, explaining that although the “shock” of the pandemic was “symmetrical” as it will hit all states, nonetheless both the drop in production in 2020 (from -4, 25% in Poland, a surge to -9.75% in Greece) and the strength of the recovery in 2021 is expected to differ “significantly”.
Unemployment rate skyrockets
Projections regarding unemployment are particularly doomy, as it is estimated to rise to 19.9% in 2020 (the highest rate in the EU) and fall to 16.8% in 2021. In fact, it is emphasized that while the measures taken by the government to protect the labor market are expected to prevent “large-scale layoffs and bankruptcies”, as many as 160,000 jobs could be lost due to the crisis.
Decline in investment
Private investments are also expected to undergo a serious shock, as a 30% shrinkage is envisaged for 2020, before going up by 33% in 2021.
In addition, the budget balance is projected to plunge again from a 1.9% surplus in 2019 to a deficit of 6.4% of GDP in 2020, which will be reduced to 2.1% in 2021.
In a similar vein, public debt will soar to 196.4% of GDP in 2020 (from 176.6% today) before dropping to 182.6% in 2021, supported by the economic recovery.
The impact of the coronavirus pandemic is estimated to be severely felt both in the tourism industry and in domestic consumption, producing dramatic effects on the economy. “Given that more than 70% of tourism revenue is concentrated in the summer months, restrictions during this period will have a significant impact on overall service exports in 2020”, the report explains.
Regarding domestic demand, it is noted that “amid limited consumption opportunities during the lockdown and reduced disposable income, private consumption is projected to nosedive in 2020”, while measures to support the economy are expected to reduce “to some extent”, as it underlines, consumer spending and pave the way for a speedier recovery in 2021.
The Commission is also sounding the alarm about inflation, as it states that “declining wage pressure, energy prices and industrial production are expected to lead to a 0.6% drop in consumer prices in 2020 and a limited increase in 2021”. /ibna