HSBC and Deutsche Bank analysts may be setting the bar very low this year for the Greek economic rebound, but anticipate 2022 will be a year of spectacular recovery for the country, boosted by the Next Generation EU resources.
For this year, HSBC has downwardly revised its growth estimate to 2.2%, from 3% previously, but it has upgraded its forecast for 2022 to a 6% economic expansion, against 5.5% in its previous analysis of the local economy’s outlook.
Likewise, Deutsche Bank estimates growth this year will come to 2%, the second slowest in the eurozone after that of the Netherlands (1.5%). However, the German lender projects a 6.1% expansion of the Greek economy in 2022, second only to Spain’s 7.4% rebound.
On the fiscal front, Deutsche Bank expects the budget deficit to persist for the next two years, so from a deficit of 9.6% of gross domestic product in 2020 it will come to 7.2% this year and 7.4% next year. The current account deficit is seen amounting to 5.4% in 2021 and 4.2% in 2022.
The Next Generation EU fund will be crucial for the eurozone’s recovery, Deutsche Bank estimates, warning that any further delays to disbursements would be a major blow to countries’ hopes for a rebound from the pandemic crisis.
Nevertheless, those funds will not be enough to turn things around for the eurozone, including Greece, with Deutsche Bank stressing that the bloc will need to do much more in order to plug the major investment gap of €1.7 trillion it suffered from when the pandemic broke out following the underinvestment of the previous 15 years. The extent of the pandemic’s shock and the major investment gap highlight the need for increased and targeted public investment expenditure.
For the Next Generation EU fund to cover that shortfall, it will take the combination of some key conditions, Deutsche Bank argues: They are the exhaustion of all its resources of €750 billion, including the loans that some countries appear reluctant about; high fiscal multipliers must prove correct in action; and commercial banks should finance private investments adequately.