The baseline scenario of the Ministry of Finance sees a 4.7% downturn in 2020 and a 5.1% growth in 2021 for the Greek economy, as a result of the effects of the spread of coronavirus, alongside a parallel decline in private consumption and investment.
Unemployment rate is estimated to be marginally below 20% of the workforce this year, with a sharp decline in imports and exports. The forecasts are incorporated into the Reform Program submitted to the Commission in the context of the European Semester and specifically state the following:
Recession: At 4.7% this year without “being being able to accurately estimate the economic impact, which will be determined by the extent of the coronavirus spread and its duration, in part depending on the effectiveness of the restriction measures. So far, the baseline macroeconomic scenario, taking into account the impact of the measures adopted to combat the pandemic, suggests that the health crisis will gradually normalize in the first half of 2020 and the greatest economic impact will be felt in the second quarter of the year.
According to this scenario, real GDP is projected to shrink by 4.7% year-on-year due to the sharp decline in trade (especially services), the steep dive in economic activity and the dwindling consumer demand. The Greek economy is expected to be affected mainly by a strong negative shock on the demand side and, to a lesser extent, on the supply side due to restrictive measures and the cessation of production chains”. For 2021, the Ministry of Finance estimates a 5.1% growth.
Consumption. In terms of domestic demand, private consumption is projected to suffer the largest decline (-4.1% year-on-year/2.7 points negative contribution to GDP), reflecting revenue losses from business closures or companies that continued business with reduced levels of production, the deferment of consumer spending due to social distancing measures and the compression of sales, with the exception of food, pharmaceutical/medical products (such as medicines, personal protective equipment) and online shopping.
Private consumption is estimated to fall by 4.1% this year and will go up by 4.2% next year. In contrast, public consumption is projected to expand (1%) amid rising government spending on health care.
Investments. Gross fixed capital formation is expected to fall to negative again (-4.6%) due to the interrupted economic activity, the more unfavorable financing conditions and the high uncertainty which affect negatively investment plans. For 2020, an explosive increase of 15.3% is projected.
Unemployment. From last year’s 17.3% it will jump to 19.9% before dropping again to 16.4% in 2021. “Overall employment (on a national accounting basis), after the reversal of its potential in 2020, is expected to recover significantly in the medium term (3.8% in 2021 from -3.6% in 2020), while the unemployment rate (based on labor force research ) is expected to further tumble compared to 2019 (16.4% in 2021 from 19.9% in 2020), as long as efforts to support affected businesses and maintain jobs during the health crisis prove successful”. /ibna