Virus second wave will derail Greek budget forecasts

Significance

The official baseline is for an 8.2% GDP contraction in 2020, and a 7.5% rebound in 2021. It took into account moderate restrictions on movement in winter 2020/21, but the COVID-19 pandemic's second wave is likely to have a more severe impact on the economy than initially hoped, increasing the risk of missed fiscal targets in 2021.

Impacts

• Structural weaknesses (high government debt, high unemployment and low investment) will undermine sustained recovery beyond 2021.
• Banks' non-performing loan reduction targets (from EUR60bn in 2020 to EUR34bn in 2021) could be missed in a recessionary environment.
• Greece's return to the path of fiscal sustainability will be delayed until 2022 at least.