Fears grow for economic slowdown

Fears grow for economic slowdown

The growing threat of the new coronavirus in Greece after the emergence of the first few cases has increased concerns over the Greek economy, generating scenarios such as those in Italy, where economic activity has been brought to a halt in certain areas of the country.

Economists and the government remain reserved for the time being as it’s too early to assess the problem – both in Greece and in the rest of the world. Any calculation would be premature at this stage, although Prime Minister Kyriakos Mitsotakis said on Thursday he had ordered the Finance Ministry to produce a provisional estimate of the virus’ impact on the economy. Observers note that if the phenomenon grows, the country’s growth and fiscal program could suffer a serious blow just as Greece is emerging from its decade-long crisis.

Economics professor Giorgos Petrakis told Kathimerini that, applying the Oxford Economics methodology at the University of Athens, they realized that if measures were introduced for four weeks in two regions of Macedonia, as was the case with three regions in Italy, Greece’s gross domestic product would shrink by 0.2 percent in the first quarter.

He added that if the phenomenon continues after March, that negative impact of 0.1-0.3 percent of GDP will expand to the whole year. A senior bank official said in recent days that this year’s growth could eventually come to 2 percent, against a European Commission forecast for 2.4 percent and a 2.8 percent estimate by the government.

The drop in tourism, exports and consumption and the interruption of the supply chain are the main factors that affect GDP, with tourism being the most obvious threat as last year the country received 31 million tourists and collected 18 billion euros from tourism. Italy earned 1 billion euros from tourism in 2019.

A Finance Ministry official said that if the phenomenon proves temporary, the consequences will be limited and the fiscal cost will be minimal. However, if it grows, the government program could be upended. “Thankfully we have the cash buffer and fiscal margins,” said another observer.

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