Greece: Ernst & Young sees recession up to 12.5% 

Greece: Ernst & Young sees recession up to 12.5% 

Ernst & Young Greece (EY Greece) presented a report with its estimates on the economic impact of Covid-19 per sector of the Greek economy, based on three possible scenarios.

The report examines three different scenarios – best case, worst case and baseline scenario – based on different assumptions about the spread of the pandemic, the rate of lifting restrictive measures, changes in social and consumer behavior of the population and other factors, and proceeds with estimates for the economic impact on 21 sectors of the economy.

According to the baseline scenario, the Greek economy will shrink by 9.5% in 2020 in terms, compared to 2019, while employment will decline by 4.1%. This scenario, which according to the report has a 60% chance, presupposes that the “R” virus transmission rate will be set at R = 1 levels, consumption will return in the medium term, investment will shrink, borders will be partially opened in July, while the social behavior of Greeks will continue to be affected by the pandemic, with fewer travel and increased remote working.

The best-case scenario, which has a 20% chance of being actualized, is based on the acceptance of an R index lower than the unit (R <1), which will allow for a speedy recovery of consumption and investment losses recorded in the second quarter of 2020, the opening of borders in June and a return to pre-corona social behaviors. According to this scenario, the reduction in Gross Value Added will be reduced to 7.1% and employment to 3.1%.

Finally, the worst-case scenario, which also has a 20% possibility, is based on an R index higher than the unit (R> 1), which will lead to a second wave of pandemic and, consequently, to an extremely slow recovery of economic activity and complete lifting of travel restrictions in early 2021. According to this unfavorable estimate, the reduction in terms of VAT will reach 12.5%, while employment will contract by 5.4%.

In all three scenarios, the recession is expected to peak in the second quarter of 2020, with a maximum decrease in Gross Value Added of 17% (baseline scenario), 15% (best-case scenario) and 19% (worst-case scenario) per estimate, with employment shrinking by 6.9%, 5.8% and 8.8% respectively, while a return to the absolute terms recorded at the end of 2019 cannot be expected before the last quarter of 2021. /ibna