Forecasts on the Greek economy revised lower

The growing number of coronavirus cases in Greece have put the Finance Ministry on alert as they threaten to send the country deeper into recession, while the government is putting additional support measures on the table that will eat into the country's cash reserves.

According to sources, concerns are growing that the rising number of cases is overturning initial government plans on the extent and type of interventions aimed at covering losses in key sectors of the economy. Finance Ministry officials, who monitor developments on a daily basis, do not rule out the possibility that the pandemic could open new wounds in the country's productive network and intensify fiscal shocks by worsening tax revenue shortfalls due to falling consumption.

The restrictive measures announced, closing restaurants and bars at midnight in many parts of the country, combined with the fact that the measures could be applied across-the-board, or even result in local lockdowns, is now creating liquidity concerns and increased uncertainties about the course of the already derailed budget.

Losses exceeded 6.1 billion euros at the end of June, while receipts for July are in uncharted waters after drops in revenues from tourism and related activities. The general government deficit is already at 6.8 billion euros, while the recently appointed Deputy Minister of Finance and Head of the Recovery Fund, Theodoros Skylakakis, recently predicted that the primary deficit in 2020 will hit 5 percent of GDP, ie well above the April forecast for 3.5 percent.

At the same time, the restoration, even of a limited, lockdown will inflict strong blows on the economy, deepening the recession and raising the cost of the state to stem the crisis. The General Accounting Office reports that it will review its forecasts after the mid August break, updating estimates on the effects on the economy from the pandemic.

Meanwhile, Finance Ministry officials are preparing a new exit in the markets for September by issuing a new bond, probably for a period of 5 years, although there are also thoughts for the re-opening of a previous issue. In any case, the aim is not only to fill the empty state coffers but also to maintain the relationship with the investment community. It is pointed out that the government expects 650 million euros from the bonds held by the central banks of the eurozone with the completion of the 8th evaluation.

Fearing a new wave of staff layoffs and businesses shutting down in the market, the government has already begun working on a new package of incentives to increase employment and support workers. At the same time, an extension of the amount of relief for property owners who lost income from the reduction of rents is being considered, while new tax breaks are being examined.

Also on the table are proposals for emergency tax cuts, which will affect specific sectors and employees who are severely affected. The summer fund for the extent of the losses will also include new measures planned by the government with reductions of social security contributions and taxes, which, however, will depend on  the course of the budget.