Recession not as deep as feared

The Greek economy is now projected to fare better than originally feared, with its gross domestic product shrinking by about 8%, against previous forecasts in the double-digits, according to a Capital Economics report issued yesterday. It followed similar forecast adjustments by Citi to -6.9% (from -7.8%) and by UBS to -6% (from -10%). “While the Greek economy is set to slump this year, it is becoming increasingly clear that the drop in activity will be much less severe than we previously anticipated. We now think that the Greek economy will shrink by ‘only’ 8% or so this year,” the Capital Economics report stated.

“The Greek economy outperformed its eurozone peers in the first quarter, recording a 1.6% quarter-on-quarter contraction – much better than the 5% drop we had penciled in or the slump in Spain, for example. Indeed, the lockdown weighed less on GDP than in other countries. Greek industry did not struggle as much as elsewhere in April, perhaps because it is less reliant on capital goods production,” said the analysis. It added that, “assuming recent localized outbreaks in the north of Greece are contained, the recovery in the third quarter will also be stronger than we anticipated. But the recovery is likely to run out of steam later in the year.”