Greece's economy is entering unchartered waters after the first cases of the coronavirus appeared on its shores as credit rating agency Moody's outlines that the risk of the outbreak turning into a pandemic has doubled.
Analysts, business and bank officials described the coronavirus as posing a serious risk to the macroeconomic environment, meaning that Greece is less likely to achieve its target for economic growth of 2.8 percent for this year. Although fresh forecasts on how the Greek economy will react do not yet exist, experts point to a 0.1 percent cut to forecast global growth for this year by the IMF, which also reduced its estimate for China's economic expansion by 0.4 percent.
In a recent report published by Moody's, the credit rating agency is more downbeat about the impact the virus, also known as COVID-19, will have on growth. It highlights that previous estimates that the virus will be limited to China proved to be optimistic and that the odds of the outbreak turning into a pandemic have now doubled — from 20 percent to 40 percent.
«The economy was already fragile before the outbreak and vulnerable to anything that did not stick to the script. COVID-19 is way off script,» Moody's said.
«COVID-19 came out of nowhere. It may be what economists call a black swan – a rare and inherently unforeseeable event with severe consequences», it added.
In regards to growth in the eurozone, Moody's sees the economy as remaining on a growth path in 2020 amidst strong fundamentals and a drop off in manufacturing eases.
In Greece, no sharp reduction in annual economic growth is expected though the ambitious 2.8 percent target is getting harder to reach.
Expansion will certainly ease in the first half of the year. But the July to December period will be decisive in shaping the country's economic performance as this is the crucial period for the tourism sector after the expected peak of the virus impact.
The basic tools Greece has at its disposal to contain the spreading of the virus is to limit public gatherings and to implement stricter controls on people entering the country. The government has already decided to cancel this weekend's carnival celebrations and is holding stricter checks on incoming visitors, in line with EU directives.
These limitations are, however, creating downward pressure on the economy. Finance Ministry officials have indicated that the government will look into ways to compensate those hit by the cancellation of the carnival activities.
In capital markets, Greece has already been hit hard. Greek stocks have lost 7.5 billion euros of their value since the start of the year, as the equity market loses all of the gains recorded since March last year. The country's ten-year bond yield, which had fallen to 0.90 percent, has jumped 38 percent to 1.238 percent. According to Moody's, the yield was so low, that it was like the markets rated Greece with a Ba1 ranking, two steps above the B1 position it currently has. Now, with the higher yield, the implied rating is one step lower at Ba2.
On the business side, the virus is also leaving its mark. Flights, tourist bookings, cruise ships, and business gatherings are being canceled, while air and sea links are weakening amidts problems in international trade.
In tourism, the coronavirus has initially hurt the number of Chinese tourists visiting the county after some 200,000 Chinese travelers visited Greece last year. If travel bans, however, pick up then this will weigh on incoming visitor numbers from other countries also.
Shipping, retail, and wholesale trade, along with air transport, are also among the sectors to feel the shock. But the number of damages cannot be estimated yet as officials tell Business Daily that they will depend on the length and depth of the problem.