Economy can take a second wave

New projections put the year’s recession at 7.5-8%, after a 15-16% contraction in April-June period

Greece’s economic recession in the second quarter will be deep but within forecasts, at 15-16% year-on-year, according to Finance Minister Christos Staikouras as well as the National Bank of Greece. Therefore, the economy is projected to shrink by 7.5-8% over the whole year, although problems will be greater for certain financial sectors, such as food service, and regions, such as the islands, due to an uneven recovery.

In the April-June quarter, gross domestic product will shrink by 16%, Staikouras told Thema FM yesterday, adding that this rate has been incorporated into the government forecast regarding an 8% contraction this year.

NBG estimates that in April, when the country was in constant lockdown for the whole month due to the coronavirus, the contraction amounted to 21% year-on-year, while in May, when companies gradually resumed operations, it slowed to 10%. Then, in the first two weeks of June – which saw the limited incorporation of indexes related to tourism enterprises – the contraction slowed further to just 4.7%, according to the bank’s analysis team led by chief economist Nikos Magginas.

The NBG analysis also calculated that the economy shrank 15% in the second quarter, for a total economic contraction of 7% over the year’s first half. With projections for a drop of 11.6% in Q3 and 2.4% in Q4, NBG expects the economy to post a fall of 7.5% for the whole of 2020.

While the macroeconomic data have remained within forecasts, there is concern about specific sectors. Staikouras acknowledged yesterday there is a problem in food service and said, “We are here to respond with more targeted action,” while on tourism he stated that, “on the islands, it does not exist or has just started taking its first steps,” adding, “We are here to see to everything.” He spoke of a possible expansion of the Syn-Ergasia labor subsidy program to more sectors and islands, and the possibility of further expanding the subsidized domestic tourism program.

The minister also said the country’s cash reserves have risen to 37.5 billion euros, from €36.5 billion before the pandemic, which would suffice for Greece to tackle another coronavirus wave.