Best scenario for economy is still bleak

The government faces the daunting task of trying to prop up the economy in December. Given the likelihood of the lockdown being extended beyond the end of November, the effort will focus on the second half of the last month of the year.

Success will mean that the economy will shrink “just” 10.5% in 2020, bringing Greece’s gross domestic product back to 2002 levels. However, to achieve even this bleak result, December earnings cannot afford to drop far below the 2019 level of 30 billion euros. It has already been accepted that this year’s figure will be €68 billion lower, resulting in a total drop in earnings of between €50-52 billion for the year.

Authorities are focusing on commerce, both wholesale and retail. Last year, this sector had €11 billion in earnings, plus an estimated €2-3 billion that were not documented in receipts. A decline of 20% in earnings will mean a nominal drop of €2.5 billion, or 1.5% of GDP.

There is little hope for hotels, which are already reeling from a disastrous summer, on the heels of the spring lockdown. In any case, December was never a month they were counting on to increase their earnings substantially.

The outlook is also poor for restaurants, cafes, bars and nightclub, as well as the whole entertainment and arts industry. Even without a lockdown, it is certain that the operation of these businesses will be limited by strict rules as to the number of customers allowed and authorities will be on the lookout for any infractions.

Manufacturing and telecoms are two other important sectors for earnings, but there is less certainty about their late-year performance.

The government is doing what it can to inject liquidity into the economy, but consumers, so far, are preferring to hoard money rather than spend it – bank account balances are swelling – and it is unlikely this trend will be reversed before a coronavirus vaccine is widely available.