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Greece Macro Outlook – Catalysts & challenges for 2021

08/03/2021 - Reports

Greek Economy

​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%.

Drivers of the post-Covid-19 recovery
  • 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.

Greece's vaccination program gathers pace and is the key to leveraging the other supportive factors. The immunization of high-risk population groups is expected to be achieved by late-summer 2021.