Growth targets become even more elusive

The Finance Ministry is increasingly leaning towards the forecast of the European Commission for a 3.5% growth rate of the Greek economy this year, as the current conditions with the extension of the strict lockdown in various parts of the country have rendered the budget target of 4.8% difficult to attain.

Finance Minister Christos Staikouras said yesterday that each month of strict restrictions shaves 0.8% from the gross domestic product’s growth rate and burdens the primary deficit by 0.7% of GDP, highlighting the heavy toll of the lockdown on the economy and the state budget.

The original estimate for the 2021 budget deficit was for 3.9%, but after the January and February measures it is seen around 5% of GDP unless things change significantly in the rest of the year.

The minister reiterated that the support measures of the first quarter will cost around 5.9 billion euros, and in any case the budget provision for €7.5 billion euros of support measures for the entire year will be overrun.

Of course if there is a major rebound this summer, these forecasts may change again. The government is pinning its hopes on suppressed demand for the increase in turnover both in retail commerce and in tourism.

Staikouras told state radio Proto Programma yesterday that “the light at the end of the tunnel” is expected in the second quarter. The government had projected a deep recession in the first quarter on an annual basis, not only because of the prolonged lockdown but also due to the comparison with the Q1 of 2020, when the GDP was in positive territory.

Even so, he said, the losses of the pandemic will not be covered this year, but in 2022, with the Commission anticipating that to happen no sooner than end-2022.

“We are expecting tourism in 2021 to fare better than 2020, but it will not reach the levels of 2019,” Staikouras noted.

The government’s objective is, according to the minister, to have the fiscal easing extended in the eurozone into 2022 and ensure that Greece will be treated in the same way as its eurozone peers despite the fact that it remains in enhanced surveillance status.