ATHENS – After being hammered by lockdowns that closed non-essential businesses to slow the COVID-19 pandemic, Greece's wracked economy is projected to grow 4.2 percent this year.
That was the assessment from the Bank of Greece in its monetary report that maintained an earlier prediction after earlier reports said the rate would likely be less than that.
But vaccinations have been working to beat back the Coronavirus crisis and stores, restaurants, bars, taverns and hotels are open again although some restrictions remain, and as tourists are beginning to arrive, a crucial factor.
The bank said it expects economic activity to come back in the second quarter that ends June 30 and accelerate through the rest of the year as the country and world hope to return to near normal life.
The forecast was higher than the 3.6 percent rate put out by the International Monetary Fund in Washington, D.C. which had been in the Troika of international creditors putting up 326 billion euros ($388.51 billion) in three bailouts that ended Aug. 20, 2018.
“The recovery is expected to gain momentum in the second half, driven by pent-up domestic demand, the launch of projects under the National Recovery Plan and an expected increase in tourism receipts relative to 2020,” the central bank said.
It projected the country’s economic growth to pick up next year to 5.3 percent but then ease to 3.9 percent in 2023.
“The increase in savings during the pandemic, either precautionary or forced due to the containment measures, and the release of pent-up demand are expected to support an increase in private consumption expenditure this year,” it said.
A primary balance of 7.1 percent is also expected, which doesn't take into account a range of other fiscal factors including interest on the debt, the cost of running cities and towns, state enterprises, social security and some military costs.
Expansionary fiscal measures have weighed on the public debt-to-GDP ratio and the government’s gross financing needs, it said. Still, the long-term sustainability of Greece’s public debt “is not at risk”.
But there was caution that the government should maintain sufficient cash buffers after pouring some 30 billion euros ($35.75 billion) into subsidies for temporarily closed businesses and laid off workers.
The European Union is also pumping 32.5 billion euros ($38.73 billion) back into the economy in loans and grants as COVID relief but there's been no account where it has been targeted.
“This leaves no room for a relaxation of the longer-term primary surplus targets, while there are increasing risks in the event of negative shocks,” it said.
The bank also said while the vaccines are working that there's still worry about variants and whether that could put a crimp into the slow recovery that's starting to build if only gradually.