Greek Finance Chief Sees Big Post COVID-19 Recovery – Maybe

November 10, 2020

ATHENS – Despite an expected contraction of the Gross Domestic Product (GDP) of at least 8.2 percent because of two lockdowns aimed at preventing the spread of COVID-19, Greece is poised for a big bounce when it ends, Finance Minister Christos Staikouras said.

There was a caveat: he said how fast and how much the battered economy comes back depends on how long the pandemic lasts, already in its eight month and with some health authorities fearing it could go at least into mid-2021.

Before the Coronavirus struck in February and March, Greece was on the verge of accelerating a recovery from a near decade-long economic and austerity crisis and reaching out to foreign investors, New Democracy trying to undo the damage from the former ruling anti-business Radical Left SYRIZA.

There was reason for optimism although many businesses and restaurants have already closed for good and worry it could get worse if the second lockdown goes past a three-week period due to lift on Dec. 1.

The Moody's rating agency lifted the country's credit indicators from B1 to Ba3, predicting a stable outlook and expecting a likely bigger bump in 2021 up to 3.5 percent growth, although it could be a difficult climb back. 

The agency praised the country’s ongoing reforms in various key areas and stressed its favorable debt structure, said Kathimerini.

”Ongoing reforms support a sustainable improvement in institutional strength and have already brought tangible progress in areas including tax administration and compliance and the fight against corruption,” said Moody's. 

The agency said it sees growth even though the biggest revenue engine, tourism, had disappointing numbers after visitors from a number of countries, especially the United States and Russia, weren't allowed in because of high numbers of COVID-19 cases there.

While Greece opened to tourists in July, people shied away in huge numbers with international travel limited and fears of the Coronavirus despite Greek hotels and the tourism sector implementing tight health protocols.

“Greece's economy will benefit from ongoing efforts to improve the investment climate coupled with inflows of very substantial European recovery funds. Favorable growth prospects, combined with a return to a prudent fiscal stance, will lead to a gradual reversal in the public debt trend. In addition, Greece benefits from a very favorable debt structure and strong affordability,” it noted.

When that was announced, Staikour said that, “This rating took place in conditions of unprecedented recession in the global economy and in the national economies, as well as of high uncertainty caused by the pandemic,” he added.

“It constitutes evidence of increased confidence in the country and the government for the management of the current crisis, its reforms, and the overall prospects of the Greek economy,” added Staikouras.

His  assessment was somewhat at odds with other estimates about the effect of COVID-19's second wave this year on businesses, although the International Monetary Fund (IMF) said Greece's economy – falling an estimated 9.5 percent during the COVID-19 pandemic – was due to rise by 4.1 percent in 2021.

The country's primary deficit could exceed 7 percent of the Gross Domestic Product (GDP) of 174.64 billion euros ($200.3 billion) said Kathimerini, with falling tax revenues costing 44 billion euros ($51.35 billion) in losses.

Greece had been growing out of a near-decade-long economic and austerity crisis, with the help of 326 billion euros ($380.43 billion) in three international bailouts that ended on Aug. 20, 2018.

Despite that aid, debt is expected to soar to as much as 205 percent of GDP, a level that New Democracy leader and now Prime Minister Kyriakos Mitsotakis said while he was out of power was unsustainable when it was about 175 percent.

The contraction is expected to be higher too with the prospect of more lockdowns around the country aimed at preventing the spread of the virus the Christmas and New Year holiday period could be a revenue washout if people can't go out to shop.

Trying to keep afloat an economy battered by the pandemic, Greece's New Democracy government earlier said it would inject another 11 billion euros ($12.84 billion) in a stimulus package through July, 2021.


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