Greece into Deep Recession after Pandemic, Credit Rating Houses say



Greece’s Ministry of Finance. File photo

International credit rating houses predict that Greece will go into deep recession in 2020, with the covid-19 pandemic causing a blow in the economy and a significant increase in the national debt.

Tourism, Greece’s main source of revenue, is already receiving a tremendous blow that will most likely continue through the summer. At the same time, the general halt in economic activity due to the coronavirus has already tremendously limited state revenue.

Analysts point out that the Greek banking sector has very low defenses to deal with the current crisis. Last week Scope Ratings GmBh predicted that the recession in Greece will reach 7 percent this year, while Citi placed the shrinking of the Greek economy from 4.4 percent to 12.4 percent in 2020, depending on the duration of the restrictive measures due to Covid-19.

According to a new HSBC report, the recession in Greece will reach 6 percent, with the second quarter being the most difficult of the year, as the recession will reach 10.3 percent and in the third quarter it will reach 8 percent. However, a strong recovery of 5.8 percent is expected in 2021.

According to UniCredit, the recession in the Greek economy this year will reach 18.6 percent and will be the deepest in the EU, while in the second quarter it will reach 35 percent. For 2021, however, the Italian bank expects the growth rate to rise to 15.5 percent, one of the highest in the world.

Regarding debt-to-GDP ratio, the HSBC estimates it will jump to 191.8 percent this year from 176.1 percent in 2019 and, as it warns, higher debt levels could delay the recovery of the investment grade.

According to Société Générale, Greek debt will rise to 194.2 percent of GDP this year, from 175.2 percent in 2019, while the budget from a surplus of 1.3 percent will drop to a 5.3 percent deficit.

UniCredit predicts that general government debt is expected to jump from 174.7 percent  of GDP in 2019 to 218.6 percent this year.

At the same time, the HSBC estimates that, due to the extensive measures to support the economy implemented by the government, Greece’s primary fiscal surplus will turn into a deficit and will reach -1.5 percent of GDP.

However, it is expected that this year international creditors will exclude Greece from achieving the goal of a 3.5 percent of GDP primary surplus as per the bailout agreement.