Greece is picking up efforts to limit the spread of the coronavirus, while also trying to keep the economy moving along as large companies put together back up plans if conditions worsen.
The main goal is to keep control of the situation and prevent a repeat of the virus spreading as it did in Italy, where authorities have been forced to take unprecedented measures, putting its north in quarantine.
Greece's growth prospects for this year have already been harmed. According to the Hellenic Fiscal Council, there could a drop in estimated economic growth this year of 0.3 percent and 0.7 percent, based on two of its negative scenarios. This means that its baseline scenario for growth of 2.54 percent for this year is reduced to 2.21 percent (scenario 1) and 1.88 percent (scenario 2). The council's economic forecasts for this year were based on the projection that growth last year in Greece reached 2.4 percent. however, the latest data shows that expansion in 2019 was limited to an annual pace of 1.9 percent.
The impact on the real economy will be determined by the duration of the epidemic and the progress made in tackling it. If the epidemic eases, with the help of improved weather, or a vaccine, then a rapid reversal of the situation can occur. Adversely, if it continues to spread, then the effects can be drastic, especially in countries with fragile economies, such as Greece.
A meeting is scheduled to take place today between the finance, development and labor ministries in a bid to come up with relief measures to the virus.
The side effects of the epidemic have far-reaching effects on the economy:
Budgetary: The slowdown in the economy and the reversal of high growth expectations this year make it very difficult to meet budgetary targets for a surplus of 3.5 percent. As the Hellenic Fiscal Council pointed out in its latest report, it may be necessary for Greece to use its cash reserves and to also use the Stability and Growth Pact's "escape clause" to justify a reduction in the surplus target.
Tourism: Cancellations are believed to have reached 30 percent, while the problem is bigger with cruises where cancellations reach up to 50 percent. A 10 percent drop in tourism this year may slash 1 percent from Greece's annual economic growth, according to HSBC. However, it is positive that tourism in Greece peaks in the third quarter of the year, when the epidemic is likely to be over.
Exports: If negative estimates for the virus are confirmed, then the impact on the global economy will be large and the blow to Greek exports will be significant. Figures from the Hellenic Statistical Authority already show fatigue creeping into export growth in the last quarter of the year, while key target markets for Greek products (Germany, Italy) are seen slowing considerably or even tipping into recession.
Banks: The major upheaval caused by the epidemic is causing multiple headaches for banks. The prospect of a slowdown in economic growth prevents the achievement of revenue and lending targets. At the same time, bad loan reduction targets will be at risk, as market conditions boost uncertainty. Furthermore, lenders are worried that the financial impact of the virus will lead to more non-performing loans and a worsening payment culture in Greece.
Shipping: Data released over the weekend on China's exports-imports is striking "terror" among shipping companies. According to a report, in the first two months of the year, China's total exports fell by 17.2 percent in dollar terms, while imports fell by 4 percent. Since China's market is the most important for the shipping sector, one can fathom the impact this development has on shipping demand and revenues. Many global shipping routes are no longer profitable for ship owners.
Aviation: The aviation sector is facing serious consequences from the spread of the virus, including a large reduction in freight traffic. According to IATA estimates, revenue losses this year could reach up to $113 billion, amounting to nearly one-fifth of total revenues. In coming days, Aegean is expected to unveil its 2019 earnings and provide a first glimpse of the impact of the virus.
Trade: Despite the economic recovery, trade was facing problems before the virus due to weak household consumption. It remains to be seen how far consumers will cut their spending and what impact this will have on global trade.
Investments: In times of serious turmoil, it is reasonable for investors to reconsider investment plans. At present, there is no indication that any of the large investments are at risk of being delayed or canceled, as projects are designed with a long-term outlook. But many Greek companies will certainly reconsider their investment spending this year, taking into account the fall in demand and tight credit conditions.