Study: Greek Economy to Face New Test When State Covid-19 Support Stops

Hellenic Parliament, Athens. Photo Source: GTP

The Greek economy is set to suffer another setback once the government’s Covid-19 lifeline to businesses stops, a new report released this week by research consultants Capital Economics found.

More specifically, the study, which is based on Bank of Greece data released on Tuesday, reveals that Greece’s economy may show signs of recovery in the third quarter of the year provided coronavirus cases remain stable and no new lockdown measures are introduced. However, given the nosedive in tourist arrivals and the economy’s reliance on tourism, recovery is expected to be slow and growth is set to contract sharply. Analysts at Capital Economics are expecting the economy to shrink by 8 percent this year.

Greece suffered a massive blow to tourism revenue in the main months of its key season which starts in May despite an upward trend recorded at the beginning of the year before the onset of Covid-19, the study adds.

When government support stops

The report also said that once government support subsidies stop, many companies will be forced to collapse which will in turn lead to more non-performing loans (NPLs), expected to rise by 10 percent accounting for 47 percent of total loans.

Lastly, analysts at Capital Economics note that while fiscal support from government measures has hindered a deeper recession, it has also brought debt sustainability into question, with estimates that Greek debt will skyrocket to over 200 percent of GDP this year.