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Greek central bank chief warns of 9.4% economic slump if pandemic worsens

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Greece’s recession-hit economy could shrink at a rate closer to its central bank’s worst-case scenario if the coronavirus pandemic deepens, the head of the Bank of Greece said on Saturday.

The central bank has forecast the economy to contract by 7.5% this year under a baseline scenario, faring worse than a previous forecast of a 5.8% decline in gross domestic product.

The bank’s adverse scenario predicts the economy to shrink by 9.4%.

“A possible worsening of the pandemic, coupled with more restrictive measures in the fourth quarter, could bring the economy closer to the central bank’s adverse scenario,” bank Governor Yannis Stournaras told Ta Nea newspaper.

That would mean a 9.4% decline in economic activity this year and a weaker rebound in 2021, he said.

Under the adverse scenario, additional targeted fiscal measures need to be considered without risking fiscal stability, Stournaras said.

“In economies with high public debt, the combination of large fiscal deficits and slow recovery leads inevitably to higher risks as regards debt sustainability, with negative effects on long-term growth prospects,” he told the paper.

Greece’s economy shrank at an annual 0.5% in the first quarter and by 15.2% in the next three months to June 30.

Greece has seen a steady rise in infections since August but is still faring better than other European countries where infections have climbed more rapidly. Still, authorities have warned the relative stability is “especially fragile.”

Greece reported 508 new confirmed infections on Friday, topping the 500 daily mark for the first time, with health authorities worried that a drop in temperatures may intensify epidemiological trends as winter months approach.

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