The European Commission’s forecast for a 9.7 percent economic contraction in Greece is not only the biggest among all eurozone members, but also considerably more pessimistic than the official forecast by the government – which Athens attributes to Brussels not factoring in Greece’s relief measures.
The coronavirus is hurting the Greek economy more than any other in the eurozone, where the recession is projected to average 7.7 percent in 2020 according to the Commission’s spring forecasts. This is due to Greece’s major dependence on tourism and the operation of many small and vulnerable enterprises.
The good news from Brussels is that Wednesday’s forecasts also speak of a significant rebound for the Greek economy in 2021, by 7.9 percent, which is more than any other country in the bloc.
The baseline scenario of the Greek Finance Ministry, submitted to Brussels last week, provides for a contraction of 4.7 percent before a 5.1 percent rebound in 2021. The adverse scenario points to a 7.9 percent drop in 2020 and an 8 percent jump in 2021.
The disparity between the forecasts by Athens and Brussels is clear, with the Finance Ministry as well as some independent economists attributing it to different estimates about when the economy will reopen: The Commission’s scenario about the entire eurozone is based on the assumption the lockdown will start easing in May, with the effects focused on the second quarter of the year. Athens also believes that the 2020 tourism season won’t be entirely lost.
Another reason, according to the ministry, is that the Commission does not take into account all measures taken to help the economy. Minister Christos Staikouras told Open TV on Tuesday that the government also estimated a 10 percent recession this year without its measures. Brussels has included several measures by Athens, but ministry sources insist the guarantee programs of 7 billion euros have not been included.
Economists add that the two sides use different multipliers for the impact of the measures, with the government being clearly more pessimistic about the effect of its measures.