With an eye on the economy, Greece's Prime Minister Kyriakos Mitsotakis completed a minor reshuffle of his cabinet on Tuesday amidst growing evidence that the country's second quarter recession will be particularly deep.
By upgrading deputy Finance Minister Theodoros Skylakakis to Alternate Finance Minister in charge of EU funds, the Greek premier is hoping to quickly tap the 72-billion-euro package heading to Athens from Brussels aimed at getting the country through the pandemic.
However, time is needed for cash to trickle into the economy from the EU, while the economic pain among businesses and households is growing fast.
Finance Ministry officials seem to be especially concerned about the tourism sector's weak performance this year. Up until a few weeks ago, the hospitality industry was seen as holding the key to providing the Greek economy with a lift. However, without tourism now offering any easy solutuions, Greece is searching for other ways to boost economic activity as the number of coronavirus cases increase (in Greece and abroad) and uncertainty is on the rise again.
"Overall, crisis management following the lifting of the lockdown is emerging as a more complex process and with more challenges than the period of the initial outbreak of the coronavirus," think tank IOBE said in a report.
Economists forecast that Greek gross domestic product in the second quarter of the year may contract by up to 16 percent. In a recent report, National Bank revised lower its forecast for Greece's economic output in the second quarter to -16 percent (from -13.5 percent), adding that a positive trend appeared in retail trade and recreation, that could trim the drop in GDP.
But since then, there has been a turn for the worse on several key issues. Fears for a very bad performance in tourism have been confirmed, while recent tensions with Turkey and the introduction of new measures to stem the spread of the virus are weighing heavily on consumption.
The latest batch of economic data for May show continued weakness in retail trade (-5.5 pct), industrial production (-7.5 percent) and exports (-32.7 percent). The labor market appears to be holding up relatively well, with an unemployment rate of 15.5 percent in April, though many expect painful decisions on this front to be made after the summer break.
Finally, the forecasts for a drop in GDP of 16 percent in Greece may be too optimistic when you compare the country with other economies with similiar characteristics.
Eurostat data released last week showed that the second quarter recession in Spain reached 22.1 percent, 17.3 percent in Italy and 16.5 percent in Portugal. These countries may have been hit harder than Greece in the pandemic's initial wave but their economies are less reliant on tourism that has come to a standstill worldwide.
Greece's statistics service is scheduled to publish second quarter GDP data September 4.
Stelios Bouras
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