Greece’s economy will contract by about 5.0 percent to 9.0 percent this year under baseline and adverse scenarios, hit by lockdown measures to stem the spread of the novel coronavirus, an influential think-tank forecast on Wednesday.
The projection by the Foundation of Economic and Industrial Research (IOBE) in its quarterly review was a sharp downgrade of previous forecasts of 2.2 percent -2.5 percent growth made only in February.
Greece has been on a recovery path after a 10-year debt crisis that shrank the economy by a quarter. It grew by 1.9 percent last year, helped by booming tourism, which is also expected to take a big hit this year.
IOBE’s forecasts were more in line with the latest projections by the International Monetary Fund, which on Tuesday estimated that Greece’s economy would contract by 10 percent this year, driving unemployment to 22.3 percent from 16.4 percent in January.
The government, which was previously aiming for 2.8 percent growth this year, now expects a 4 percent contraction, its finance minister has said.
“Unemployment could rise to 19.3 percent under the baseline scenario … or even higher to 21.2 percent under the adverse scenario,” IOBE head Nickos Vettas said.
The think-tank’s baseline scenario assumes lockdown measures will stay in effect until mid-May and be gradually lifted thereafter, including a resumption of tourism.
The adverse scenario assumes that coronavirus flares up again in the autumn, prompting further restrictions on households and businesses.
Credit ratings agency Moody’s meanwhile said it saw the economies of Greece and Cyprus contracting this year because of the pandemic, which it expects to affect both countries’ banks and their profitability.
“The outlook for the banking systems of Greece and Cyprus has changed to stable from positive because of economic disruption caused by the coronavirus outbreak,” Moody’s said in a report.
Greek banks had been lining up buyers for billions of euros of bad debt to free up their balance sheets, but with the pandemic expected to send economies into freefall, their recuperation has come to an abrupt halt.