The coronavirus is pulling the brake on Greece's economic recovery, slashing up to 0.9 percent of growth for this year, according to analysts from Alpha Bank. The dip though is likely to be shortlived, resulting in a V-shaped economic bounce, with most of the fallout from the virus expected to be seen by the end of the third quarter.
Looking ahead, the bank sees three possible scenarios emerging:
Scenario 1: The spread of the virus is limited. External demand suffers a mild and short term shock, as is the case with domestic uncertainty, in conditions expected to last until the end of the second quarter of the year.
Scenario 2: A domino effect across Europe. A serious but short term shock to external demand and a mild shock to domestic uncertainty.
Scenario 3: A broader domestic epidemic. A strong shock to external demand, along with a deeper and longer shock to domestic uncertainty that lasts until the end of the third quarter.
The forecast drop in gross domestic product for 2020 ranges from 0.4 percent to 0.9 percent, in comparison with initial estimates for the year.
According to the bank, this year's growth momentum, and especially the next quarter's, will be determined, by the duration of the Covid-19 epidemic and Greece's refugee crisis at the border with Turkey. According to the latest developments, the Covid-19 epidemic is predicted to hurt both global and national economies in 2020
These forecasts have been based on information currently available and are considered to have a high level of uncertainty given the problem is still unfolding.
The report points out that the following sectors will be affected most:
Tourism: According to an estimate from the World Tourism Organization (UNWTO), tourist arrivals are seen dipping by 1 -3 percent in 2020 globally, resulting in a revenue drop of $30-50 billion. For Greece, this translates into a drop of up to 940,000 tourists in 2020. The negative impact is estimated to be limited due to the seasonal pattern of the Greek tourism industry, as 85 percent of total arrivals take place between May and October. However, another important factor is a possible drop in visitors, mainly from more distant countries, due to Greece's geographical proximity to Italy, where the spread of the virus has been rapid in recent weeks.
Shipping. Due to Covid-19, there has been a 50 percent drop in freight rates on bulk carriers. This development is very important given that 80 percent of global goods volume is transported by sea, with 7 of the 9 busiest ports located in China.
Air Transport: The International Air Transport Association (IATA) estimates globally a $29.3 billion drop in revenues as a result of travel restrictions, deteriorating consumer confidence and companies imposing precautionary travel measures against the virus.
Export trade by road: Many of Greece's exports are through countries affected by Covid-19, such as Italy.
Retail trade. Consumer spending is projected to decline, with consumer confidence deteriorating, potentially affecting smaller retailers more and larger retailers less.
In the event of a longer virus crisis, the following sectors will also be affected:
Real Estate and Constructions: A reduction in sales and delays in construction schedules are seen arising.
Catering: Demand will drop due to declining tourist arrivals or even domestic demand, particularly in the case of home restrictions being imposed.
Financial Services: A reduction in trade volumes, foreign exchange transactions and credit provided to the tourism, catering and retail sectors. Also, competition will increase from Fintech companies.
However, two sectors will see a rise in business if current conditions continue:
Pharmaceutical and health sectors: Sales could rise due to higher demand for antibiotics, medical services, and medical supplies/equipment.
E-Commerce: Increased online sale due to avoidance in physical shopping amidst concerns about virus transmission
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