Bank of Greece sees zero growth this year

The Greek economy will fall to zero growth this year while it will show a significant divergence from fiscal targets for the year, the Bank of Greece said in its annual report on the Greek economy, presented on Friday.

The report noted that the smooth course of the economy was interrupted by the spreading of the coronavirus, which from an economic point of view can be considered to be a very serious external turbulence affecting demand and supply and the financial system. Despite the fact that it is very difficult to quantify the repercussions on the Greek economy, it is clear that these will significantly reduce the estimated economic growth rate to zero, down from an estimated rate of 2.4 pct in 2020. The central bank said it likely that the Eurozone economy will enter negative growth rates this year.

The Bank of Greece expects these negative effects to be felt in the first two quarters of the year, particularly in the second, and that these will be partially offset in the last two quarters, supported by coordinated economic policies implemented globally.

The central bank noted that, according to available cash figures of the general government in 2019, the country has exceeded its primary surplus goals for the fifth year in a row to around 4.0 pct of GDP. However, in 2020 the spreading of the coronavirus will lead to high spending to deal with the virus, support enterprises, protect employment and negatively affects economic growth and state revenue. This is expected to bring the primary surplus of the general government several percentage points below the initial goal of 3.5 pct of GDP in 2020, although it is extremely difficult to make any precise estimates at this point. The Bank of Greece, commenting on the banking system, said that business plans drafted by the Greek banks to reduce their non-performing loans were now under revision ahead of the emergerncy circumstances and conditions of great uncertainty. These are expected to negatively affect the course towards achieving the goal of significantly reducing NPLs in the short-term, but not the final goal of bringing NPLs below 20 pct of total loans by the end of 2021.