The depth of Greece’s recession will be determined by tourism as the size of the industry's losses in the third quarter will shape the extent of the damage to the economy for the whole year.
Also weighing on GDP are trade, investments and the amount of resources that will flow into the country from European funds. For the time being and based on data so far, Finance Ministry officials insist on the scenario that sees the recession at 8 percent, although they do not rule out the possibility of a downward revision. It is noted that in the first half of the year, the recession is running at a rate of 7.9 percent, ie within government forecasts.
According to the Ministry of Finance, a clear and safe picture of how the pandemic has affected GDP will exist in September with the weight falling on tourism, where in the third quarter of the year the sector does 60 percent of its annual business.
However, tourism officials emphasize that the summer season ended with large losses in revenues as the occupancy of hotel units did not exceed 30 percent nationwide and warn of mass shut downs. According to the latest forecasts for the course of the industry, in 2020 revenues are not expected to exceed 3.5 billion euros compared to 18.2 billion euros last year and will fall even lower if we take into account the fact that due to cancellations of hotel reservations significant amounts should be refunded to their customers.
Tourism’s woes are dragging the restaurant business lower, a sector that is further suffering due to the implementation of restrictive measures on its working hours, while due to the fear of the coronavirus, conditions are set to worsen in the winter months. Based on the data so far, the drop in turnover is around 50 percent on average while one in three businesses are on the brink.
At the same time, the financial hardship of households and the uncertainty for the next day are hurting retail trade, which in the first half of the year lost more than 8 billion euros, with the outlook for the coming months remaining bleak.
The freeze in the investment sector due to the climate of insecurity is another aggravating factor for the recession with the restoration of sentiment needed to boost confidence among Greek and foreign investors.
The landscape is also foggy in the construction industry that has been frozen and is moving into uncharted waters as no one can predict the time and the rate of the recovery.
At the same time, there is no exact timetable for the disbursement and the amount of resources from the Commission's packages, while the expansion of expenditures and revenue shortfalls have caused a derailment of the budget, undermining the fiscal firepower for support measures. European funds are an important factor as they will strengthen the financial strength of the government to take countermeasures against the coronavirus as well as providing liquidity in the market by keeping the cash resources at satisfactory levels.
Meanwhile, the biggest post-war recession was recorded by ELSTAT data on GDP in the second quarter with its amount in absolute numbers (41,270 billion euros) going back to the years of the drachma and specifically to 1996. It is noted that the drop in GDP against of the second quarter of 2019 was 7.4 billion euros with consumption shrinking by 5.349 billion euros and exports falling by 4.629 billion euros. Compared to the first quarter, a total of 6.74 billion euros were lost.