ING Study: Greece Among Eurozone Economies Vulnerable to Covid-19 Shock

Despite being relatively contained, the spread of Covid-19 is expected to have a significant impact on growth in Greece, with recovery after the crisis subsides to be slower, according to a study released this week by banking and financial services group ING.

More specifically, according to ING, as the lockdown measures taken to fight the deadly coronavirus make it impossible to travel, the immediate growth impact will be larger for countries dependent on the tourism and travel sector.

The Amsterdam-based group found that Southern eurozone economies appear to be more vulnerable than their northern counterparts due to larger exposure to tourism, smaller automatic stabilizers, larger share of vulnerable workers, and higher chance of bankruptcies due to firm size.

Greece, together with Portugal and Cyprus, rely greatly on tourism and travel. Despite the limited spread of the virus, growth impact will be large, say ING analysts, adding that fear of traveling will likely last longer than the pandemic making it difficult to foresee an immediate recovery once the lockdown measures are lifted.

ING goes on to cite World Travel and Tourism Council (WTTC) data which shows that the average recovery time for visitor numbers to a destination after a major viral epidemic is about 19 months.

According to the same study, factors making a country more vulnerable to the Covid-19 shock and impacting the recovery process, include size of companies and their financial, managerial and technological resources; the fiscal system; labor market structure – employees in the informal sector have no social protection and are more difficult to reach with targeted measures, while self-employed and temporary workers generally have lower social protection.

On top of that, a high share of temporary workers in tourism make the labor market more cycle-sensitive, meaning that a large number of people can become unemployed in recessions.

Another decisive factor are national tax and benefit systems meant to cushion economic shocks. On average, about 35 percent of the impact on household incomes is absorbed by the tax and benefit system in the EU, according to the European Commission. However the extent differs from country to country.

Austria, for instance, sees 45 percent of an income shock absorbed by automatic stabilizers, but in Greece this percentage is below 30 percent.