The Greek economy is projected to contract by 9.0 percent this year; however, growth projections for 2021 foresee growth of 6.0 percent, the European Commission said in its Summer Economic Forecast report released on Tuesday.
The EU executive body said that Greece’s GDP declined by 1.6 percent on a quarterly basis in the first quarter of 2020 compared to the previous quarter, reflecting the beginning of the coronavirus containment measures at the end of March.
The decline in GDP was driven by a drop in investment and lower exports, while government expenditures and private consumption contributed positively.
Economic activity was first to decrease in the arena of services, and to a lesser extent industry and the agricultural sector, while construction cushioned the downturn, likely due to a cut in the sector’s VAT rate in January.
The full economic effect of the containment measures is expected to have materialized in the second quarter, with a strong decline in domestic demand and exports.
As social distancing measures are gradually relaxed in Greece, economic activity is expected to start rebounding, leading to a partial recovery of domestic demand.
The swift implementation of fiscal measures amounting to about 9 1/2 percent of GDP to counteract the economic impact of the pandemic should cushion domestic demand to some extent, the report says.
It adds that the sectors of tourism and transport are expected to be hit hard by the crisis. The concentration of tourism in the summer months makes Greece particularly vulnerable to travel restrictions and COVID-19-induced changes in travel behavior.
The economic downturn is still expected to lead to a relatively short-lived increase in unemployment.