Greece’s economy will contract by 4.7% in 2020 due to the pandemic crisis but it will return to positive growth with a rate of 5.1%, the Finance Ministry said in its reform program sent to the European Commission in the framework of the European Semester.
Unemployment is expected to reach 20%, the program predicts among others. adding that due the lockdown private consumption, investments, imports and exports are expected to drop significantly.
According to the ministry, the Greek economy suffers a triple shock: one temporary but very strong shock in supply. The lockdown reduces production of goods and services, along with incomes of producers and labor forces, a very strong shock in demand as the lockdown reduces consumption and a very strong shock of uncertainty since both the duration and intensity of the phenomenon were unknown.
1. The reform program envisages a 4.7% economic recession in 2020 based on the assumption that a healthcare crisis will gradually recede after the first half of 2020, with the economic impact expected to be visible in the second quarter of the year. The economy is projected to recover with a 5.1% growth rate in 2021.
2. Unemployment rate is projected to rise from 17.3% in 2019 to 19.9% in 2020 and to fall to 16.4% in 2021.
3. Private consumption is expected to fall by 4.1% this year reflecting losses of income and a suspension of consumption spending due to measures to restrict social contacts. Consumption is expected to grow by 4.2% in 2021. On the other hand, public consumption is expected to grow by 1.0% due to increased state spending.
4. Inflation rate is expected to return to 2019 levels (harmonized consumer price index) to -0.3% in 2020, rebounding to 0.6% in 2021.
5. Private investments (gross fixed capital formation) are expected to fall by 4.6% and to jump by 15.3% in 2021.
6. The state budget’s primary surplus is expected to significantly fall short of the 3.5% of GDP aim for 2020.
7. Exports of goods and services are expected to drop by 19.2% this year, while imports are projected to fall by 14.2%. Both exports and imports are expected to grow by 19.2% and 15.6% respectively in 2021.
Greece is gradually lifting the lockdown restrictions as of May 4 in an effort to re-start the economy. However, strict operational rules for businesses in all sectors are expected to lead to lay offs and even businesses closure. Not to mention that the “heavy industry” of the country, the tourism, is expected to fall extremely short this year.