The first wave of the pandemic hit the Greek economy hard. Tourism, the country’s main driving force, was severely affected.

Still, in summer, Greece opened its borders and started receiving thousands of tourists. Q3 GDP is estimated to have recorded a sizeable 7.7% expansion, on a s.a. quarterly basis. Hopes were raised that the damage to the national recovery effort could be contained.

But the rebound proved short lived. Before summer ended, the first worrying signs appeared.

As the High Frequency Forecast of Greek GDP by the National Bank of Greece notes, different factors leave little room for optimism:

  • The pick-up in tourism activity in late-July and August (increase in arrivals of 38% m-o-m, s.a.) faded rapidly in August-September.
  • Business turnover contracted in August. A key factor was the negative second round effects from weak tourism on other sectors. A tourism-related drag led to a decline in the turnover of retail-wholesale and manufacturing.
  • When epidemic trends started to deteriorate indicators of domestic demand showed signs of weakness, following a solid rebound in June-July.
  • A downward revision in mobility data by Google since midAugust showed that the positive momentum was lost earlier-thaninitially-expected, with mobility related to retail & recreation trending downwards in September and October to 5% and 10% below its preCovid baseline level. In the first week of November, mobility dropped further.
  • Consumer confidence declined to a 2-year low in October.

Source: National Bank of Greece

So where does Greece stand now?

Will the second lockdown be as harsh on the economy as the first?

Source: National Bank of Greece

NBG’s High Frequency Forecast of Greek GDP says that “the recessionary impact is expected to be ameliorated” due to:

  • higher preparedness of an increasing number of enterprises to use electronic sales channels
  • increased awareness and familiarity of households and firms with the restrictions, fact that reduces potential disruptions in spending and enables planning, as indicated by an increase in retail sales in the days preceding the 2nd lockdown, as reported by market sources
  • limited drag from tourism in this period
  • potential support in confidence from positive news on the Covid-19 vaccine front.

Plus, there is a generous stimulus package provided by the Greek government. It started with €3.8 bn (measures announced in late-October/ early November) and  increases to €5.0 bn (3.1% of GDP), if the retroactive payment to pensioners is included.

The measures, mainly, comprise economic support to affected employees, extension of unemployment benefits, deferrals of tax and social security contribution payments and an additional round of “repayable-advance” scheme. It  is reinforced by the increasing flows of liquidity support through State guaranteed loans and the previous rounds of “repayable-advance” scheme, which jointly exceeded €8.0 bn in 10M:2020 (including new bank lending).

Still, considerable risks persist:

  • the limited ability of the weakest economic entities (households and firms) to withstand a second round of lockdown, despite the fiscal support
  • a part of extraordinary Covid-related spending in Q2 and Q3, especially on consumer durables, ICT and health equipment, and specialized services, is not recurring in Q4
  • weaker external demand conditions, following a strengthening in the previous months.

To conclude NBG’s Forecast sees “a new drop in GDP in Q4, which, however, should be milder than in Q2 , assuming an effective control of the pandemic in November.”