Bank of Greece Governor Yannis Stournaras expects the country’s economy to contract by 6% of gross domestic product this year as a result of the coronavirus crisis, but this could be followed by a rebound of 5.5% in 2021, he told a committee in Parliament on Monday.
“For as long as there is no vaccine or medicine, fear will create conditions of stagnation,” the economist told lawmakers in the committee that is discussing his nomination for a second six-year term at the central bank’s helm.
Given the combination of the country’s successful response to the first wave of the crisis and continued global uncertainty, Stournaras said that the BoG predictions foresee a recession this year ranging from 4.5-9.5% of GDP, with the median projection at 6%.
“The primary budget deficit will be about 3% of GDP after the measures taken by the government; it will turn to a primary budget surplus of about 2% next year,” Stournaras added.
The BoG is also predicting a credit expansion of 15 billion euros at least, Stournaras said, adding that banks have the necessary liquidity to prop up the country’s productive force, but also that a bad bank would help reduce impaired loans burdening Greek bank balance sheets.
“Experience shows that reducing bad loans on bank balance sheets fast can happen through a bad bank. We must explore all possibilities to see if we can have one,” he said. [ANA-MPA/Reuters]