A spread of the coronavirus outbreak in the euro zone is likely to put the brakes on Greece’s recovering economy and trim its projected growth this year, the country’s fiscal council said on Tuesday.
A member of the European Union’s independent fiscal institutions network, the council, which assesses the macroeconomic projections the government’s budget is based on, expects the economy to expand by 2.54 percent this year under a baseline line scenario, below the government’s 2.8 percent projection.
But under two different adverse scenarios, the Greek economy’s growth rate could slow to 2.21 percent or 1.88 percent this year, affected by a euro zone growth slowdown, it said.
“The spread of the SARS-COV-2 (coronavirus) is certain to cause a downward revision of world growth forecasts in 2020. Its spread in Europe will slow euro zone GDP growth,” the thinktank said.
It estimated that for every one percentage point decrease in euro zone GDP, Greece’s gross domestic product would slow by about 0.8 percent.
The coronavirus crisis could hit Greece’s current account balance if revenue from tourism and maritime transport declines and consumer spending slows.
Missing this year’s 2.8 percent growth target could have a negative fiscal impact, meaning the government may need to look for budget “cushions” for possible extraordinary spending on health.
The government may also need to use part of its cash buffer, in consultation with official lenders, “so that any deviation from the primary budget surplus of 3.5 percent of GDP does not lead to restrictive fiscal measures”.
Greece has seven confirmed cases of coronavirus so far, with no deaths, a relatively low toll for Europe, where the virus has spread widely and caused more than 50 deaths and over 2,000 cases in the worst affected country, Italy.