The Bank of Greece reiterated its 4.2% growth forecast for 2021 on Tuesday, but warned that the Greek economy is facing a large number of bankruptcies of unsustainable enterprises after the year-long coronavirus crisis.
Bank of Greece Governor Yannis Stournaras is relatively optimistic for 2021 in his annual report for 2020, sticking to its forecast for an economic expansion of 4.2%, which is higher than that of the government and the European Commission, pegged at 3.5%.
However, he cautioned that this involves a lot of uncertainty due to the risks associated with the course of the pandemic as well as the special features of the Greek economy.
The pandemic has dealt a severe blow to Greece’s economy, the report states. However, it adds that it has also served as a catalyst for change, accelerating nascent trends and prompting fundamental reforms within just a few months.
“The speed at which the economy will recover will depend on three crucial factors: the acceleration of vaccine rollout schemes at the domestic and global level, the maintenance of support targeting those worst hit, and the speed of the activation of the National Recovery and Resilience Plan,” Stournaras said.
Growth and job losses in Greece
The report further projects many job losses, “especially in intermediation services and in low-skilled labor-intensive sectors.”
“The pandemic accelerated structural changes in the labor market,” Stournaras says.
“Hardest hit were the more vulnerable categories of workers in sectors relying on face-to-face interaction and in intermediation services, which are increasingly digitalized. In contrast, high-technology industries have posted faster growth than the more traditional sectors.”
Stournaras called for a safety net for workers in non-viable businesses.
“It is necessary to maintain selective economic support measures targeting the sectors of the economy and categories of workers that were worst-hit by the pandemic.”
The bankruptcies, job losses and income decline will inevitably lead to an increase in private debt and a new rise in the already considerable volume of NPLs.