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Economy

Greece’s Economy to Shrink by Estimated 8.2% This Year

ATHENS — Greece's economy will contract by an estimated 8.2% this year due to the effects of the coronavirus pandemic before picking up next year, the government said Monday as it submitted its 2021 draft budget to parliament.

The 2021 budget was "drawn up in an environment of unprecedented uncertainty, due to the indefinite expiration date of the unprecedented coronavirus pandemic," government spokesman Stelios Petsas said.

Greece emerged nearly two years ago from eight years of international bailout programs, during which it made deep spending cuts and tax increases to qualify for rescue loans. Its financial crisis sent unemployment skyrocketing and wiped out a quarter of the economy. 

The country's public debt is projected to reach 337 billion euros this year, or 197.4% of gross domestic product. That would fall slightly to 342 billion euros, or 184.7% of GDP, in 2021, according to the draft budget. Unemployment is forecast to rise to 18.6% this year, compared with 17.3% last year, before dipping to 16.5% next year.

Petsas said the recession forecast for 2020 is less severe than the 8.7% contraction estimated for the eurozone as a whole. The economy is expected to bounce back 7.5% next year, so that "Greek people's income will remain almost unchanged" during the two-year period, the budget said.

The primary budget balance – that is, the government's budget without taking into account the cost of servicing debt – will tumble to a deficit of 6.2% this year, and remain in a deficit of about 1% next year.

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