Growth leads economy back to 2019 levels: Tourism holds the key

The latest data on business revenues in the second half of the year reflect the economy’s strong recovery after the lockdown. In combination with encouraging data on the tourist season, optimism is growing for an economic growth rate in 2021 that will exceed the Finance Ministry’s moderate forecasts (3.6%) and will probably move towards the more optimistic forecast of IOBE (5% - 5.5%), or even higher, unless of course there are negative developments regarding the pandemic.

After the unexpectedly good performance of the economy in the first quarter, where the drop in GDP reached 2.3%, the data on the turnover of companies in the second quarter, published yesterday by ELSTAT, confirmed the strong pace of economic activity in a quarter that includes two months (May and June) without the strict restrictive measures.

The data show that the economy is returning to levels recorded in 2019, as:

• The turnover of the business sector amounted to 78.382 billion euros, compared to 60.57 billion euros in the corresponding quarter of 2020. That is, there was an increase in turnover by 29.4%.
• The most important conclusion, however, emerges from the comparison with the second quarter of 2019, when the economy was in normal mode, a year that ended with quite significant growth. In the second quarter of 2019, turnover had reached 78.8 billion euros, ie  slightly higher than the 78.382 billion in the second quarter of 2021.

The good performance of the business sector during the second quarter of the year came without tourism having fully recovered, as the end of the restrictive measures came in May and the period until June was relatively sluggish.

The key to the economy's return to growth were the support measures that protected the business sector from the effects of the pandemic and prevented a sharp rise in unemployment, leaving no permanent scars from this crisis. As Alpha Bank analysts have pointed out, the maintenance of the number of new businesses in 2020, at the same level as in 2019, the limited number of businesses that closed, but also the modest decline in employment are due to a large extent to aid measures adopted by the state.

Tourism is key

The data for the turnover of the second quarter indicate that there will be a boost to second quarter data for the GDP of the second quarter that will be announced by ELSTAT September 7. Much will be decided by the tourist season, which seems, so far, to be beating forecasts.

In terms of bookings on international flights, Greek tourism seems to be reaching a significant milestone this August, as, for the first time since the outbreak of the pandemic, bookings exceed the level of August 2019, according to data from the consulting company for OAG Civil Aviation Issues, published by the Financial Times.

In particular, while in Europe this August booking tickets for flights are about 31% lower than the level of August 2019, in Greece bookings for international flights have not only reached the level of August 2019, but are also 2% higher, as strong demand is recorded from Germany (25% increase), Switzerland (26%) and France (31%).

Analysts' estimates point to the achievement of the target set for tourism revenues in 2021, which will correspond to at least 50% of revenues in 2019, without ruling out an increase in the percentage to even higher levels.