Greece Macro Outlook – Catalysts & challenges for 2021

​Managing the exit from the pandemic crisis and challenges to a turnaround in 2021

• The recessionary impact of the pandemic, despite the efforts to adjust and target restrictions to changing developments, is partially offset by very strong fiscal support.
• The fiscal impulse in 2020 was c. €10.0 bn, equivalent to 6% of GDP, limiting the decline in FY:2020 GDP to 8.0% and promoting resilience in the labour market, with the unemployment rate declining to 16.5% in 11M:2020 compared with 17.3% in 2019. In fact, total compensation of employees declined by only 0.8% in FY:2020 and private consumption by only 4.7% in the same period.
  
• Q4:2020 and 2M:2021 data indicate that the second round of restrictions had a far milder negative impact on economic activity compared with Q2:2020, when the first lockdown was implemented (i.e. a decline in GDP of 7.9% y-o-y in Q4, +2.7% q-o-q, s.a., compared with -13.8% y-o-y in Q2:2020), in part assisted by increased familiarity with e-commerce (increasing by more than 80% y-o-y in value terms), as well as the resilience of public and private consumption, fixed investment and strong goods exports.
• NBG's monthly indicator, estimating the trend in GDP on the basis of high-frequency data, points to a mild contraction in Q1:2021 GDP by -1.3% q-o-q, s.a. (-9.5% y-o-y) combining a further pick-up in activity in January 2021, coinciding with the temporary easing of restrictions on retail trade, followed by a decline (-1.9% m-o-m, s.a.) in February and a stabilization in March.
• For the rest of the year, average GDP growth is expected to exceed 10.0% y-o-y, despite the unfavourable starting point, supported by steady progress in vaccinations and a rebound in tourism activity from a very low base (+80% y-o-y according to our baseline scenario), with FY:2021 GDP growth of 4.7%.
  

• An additional stimulus in 2021 translates into a net fiscal impulse of 1.4% of GDP.
• Latent household and corporate demand will gradually support the recovery through an unwinding of the increase in savings and the spending of the credit expansion of 2020, respectively.
• Tourism will provide a push to the economic recovery (+1.8 pps in 2020 GDP growth), with Greece's major tourism markets leading the race to vaccinate their populations.