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Economy

Greek Economy Shrinks Record 15.2% Over COVID-19 Lockdown

September 4, 2020

ATHENS – A 10-week lockdown of non-essential businesses that began in March to slow the spread of COVID-19 did substantial and long-term damage to Greece's economy, which shrank a record 15.2 percent in the second quarter of 2020.

That was reported by the Hellenic Statistical Authority (ELSTAT) which found it was just short of the 16 percent hit to the Gross Domestic Product of 168.9 billion euros ($200.3 billion) that was expected but still a shocker.

The New Democracy government was accelerating a slow recovery from a near decade-long economic and austerity crisis after the Aug. 20, 2018 end of three international bailouts of 362 billion euros ($429.3 billion) when the pandemic hit.

The first 15 days of lockdown in early March had also taken a toll on the beleaguered Greek economy in the first quarter, with a GDP contraction of 0.9% compared to the first quarter of 2019 and 1.6% compared to 2019's period, said Kathimerini.

In its worst-case scenario, the Finance Ministry had foreseen a contraction of 15.7% for the second quarter of the year, with the recession over 2020 as a whole estimated at around 8%, a development that would take the Greek economy back to 2017 levels.

The GDP shrank 14% between April and June, marking the steepest quarterly contraction in at least 25 years and threatening to undermine the recovery as Prime Minister Kyriakos Mitsotakis had been wooing foreign investors scared off by the former ruling anti-business Radical Left SYRIZA he deposed in July 7, 2019 snap polls.

The loss comes on top of the GDP contracting some 25 percent during the crisis that began in 2010, worsened by austerity measures put on workers, pensioners and the poor while politicians, the rich, privileged, oligarchs and Parliament workers escaped.

But even the during the crisis, the economy's worst quarterly contraction, in the first three months of 2009, was a comparatively modest 4.7%, according to ELSTAT, reported the Reuters news agency.

Greece still has the highest debt-to-GDP ratio that constantly hovered near an unsustainable 175 percent and will need decades to pay back the rescue packages with the economy monitored by the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) to make sure fiscal targets are hit.

A complicating and worrying factor is how much the country's biggest revenue engine – tourism – will suffer as far fewer people that hoped for came this summer after the borders were opened to many countries beginning in July, people still COVID-19 shy and afraid to travel.

The tourist sector is seen shrinking up to 10 percent after many hotels didn't even try to open because of restrictive and expensive health protocols that would have been required and few to no bookings.

and was looking forward to a strong recovery this year. But with the impact of the

The Greek economy is expected to shrink 9% this year due to the effects of the coronavirus pandemic and the lockdown measures that have severely affected international travel, according to the current European Commission forecast.

Greece said it expects the contraction to be slightly milder. Government spokesman Stelios Petsas said the latest figures reflected the effects of the lockdown and had not changed Greece’s annual expectations, which are of a 7.9% decline in GDP this year.

The pandemic, however, is likely to hamper Greece’s efforts to overcome many long-term problems, including high levels of public debt, a large volume of distressed private sector loans and lingering high unemployment. 

(Material from the Associated Press was used in this report)

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