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World

Greece eyes strong rebound in 2021 after this year's slump

  • Greece emerged from its third international bailout in 2018 after a decade-long debt crisis that wiped out about a fourth of its output.
05 Oct 2020

ATHENS: Greece's economy is expected to bounce back to grow by 7.5pc next year after a steep contraction this year caused by the coronavirus pandemic, according to a baseline scenario in the 2021, draft budget submitted to parliament on Monday.

Under an adverse scenario, the economy will grow by 4.5-5pc next year, the draft budget projected.

Greece emerged from its third international bailout in 2018 after a decade-long debt crisis that wiped out about a fourth of its output.

It was looking forward to a strong recovery this year before the pandemic plunged it into what now the draft estimates will be a 8.2pc slump this year.

Greece's economy shrank 14pc in the second quarter, marking the steepest quarterly contraction in at least 25 years and threatening to derail the country's reform efforts.

Depending on a scenario, the primary budget deficit, which excludes debt servicing outlays, is expected to narrow to between 1pc and 3pc of gross domestic product in 2021 from a 6.2pc shortfall seen this year.

Amid increased tensions in the eastern Mediterranean over energy resources, Greece also plans to boost its defense spending, with 2.5 billion euros earmarked for new armaments in next year's budget compared with 500 million euros this year, according to the draft.

Finance Minister Christos Staikouras said in a statement that the aid released by the European Union help its members recover from the coronavirus shock could boost Greece's recovery.

Greece was allocated 32 billion euros, split between 19.3 billion in grants and 12.7 billion in loans.

The aid is seen boosting growth by two percentage points, from 5.55pc in the baseline scenario to 7.5pc, Staikouras said.

Tax relief and cuts in social security contributions due in January will also help the recovery, the draft said.(For a factbox with key targets click on:)

Gross fixed capital formation is forecast to recover strongly next year, rising 30.4pc after a 10.9pc drop in 2020.