Greece’s Finance Ministry may be labeling a 4.5 percent GDP growth projection included in its 2021 draft budget as being the negative scenario but economists see this target as being optimistic, with some predicting an even lower recovery rate for the country.
The draft budget, submitted to parliament on Monday, targets a GDP recovery rate of 7.5% in 2021 with a reduction of the primary deficit to 1% of GDP, if the health crisis develops smoothly and European funds to deal with the pandemic flow into Greece quickly.
It also contains an unfavorable scenario predicting slower growth, at 4.5% in case things on the pandemic do not go well, according to government officials.
Three months before 2021 and conditions do not leave much room for the optimistic forecasts.
Economies are sinking into recession and no one dares to say when things will change for the better. Restrictive measures and economic uncertainty are on the rise, weighing on investment and consumer climate amid mixed news concerning when a vaccine to the coronavirus will be found.
For the Greek economy, a series of new reports have been published in recent days by the European Bank for Reconstruction and Development (EBRD), the Dutch ABN AMRO and Italy’s UniCredit. In all three reports, forecasts for Greece’s economic performance in 2021 were revised lower.
The EBRD lowered its Greece forecast to 4% for 2021, from the 6% forecast announced by the the bank in May. ABN AMRO sees a mild recovery of 3.5%, in line with a similar view from UniCredit which expects slower growth of the Greek economy at 3.8% (compared to 4.3% previously).
The Italian bank points out that Greece's short-term growth prospects remain murky due to the sharp rise in new coronavirus cases when the country's borders reopened, pushing the government to reinstate local restrictions on social activity.
According to a European bank economist, in order for the country's GDP to grow by about 5 percentage points, the restrictive measures that were recently introduced need to be lifted by next March. Also, the vaccine needs to have been found.
To expand by 5% next year, this assumes that the vaccine has been found and the market and consumer psychology has changed, and here is the big question, the economist stressed in comments to Business Daily.
On the other hand, investments that had been frozen in 2020 will give a big boost to the economy, helping support a big leap for the economy. "The base effects next year will be very strong," the economist points out.
In the budget, the Finance Ministry also notes that investments are seen soaring by a rate of 30.4% next year after a fall of 10.9% in 2020.