What's Ahead for the Greek Economy?

While the effects of the COVID-19 pandemic have been broadly similar for individuals, families, societies, and economies globally, the policy responses have varied significantly between countries. In the case of Greece, the pandemic abruptly ended the country's fragile recovery and threw its economy into a dramatic contraction beginning in 2020Q2. Fiscal stimulus programs financed by reserve funds and European-backed structural funds have been implemented, but to date there is no evidence of a significant impact. Given the emergence of COVID-19's second wave of contagion and the economic consequences of business shutdowns and further job losses, our own growth projections, as well as those from the European Commission, IMF, OECD, and the Greek government, have been revised downward for 2021 and prospects for the beginning of a recovery before the end of 2020 have died out. Using their stock-flow consistent macroeconomic model developed for Greece (LIMG), we run simulations for a baseline scenario and two alternative policy outcomes. The results of the projections for a "business as usual" baseline scenario are pessimistic and show that a V-shaped recovery is not in the cards. The European "recovery funds" alternative scenario projections, while more pessimistic than our report from May 2019, indicate that implementing these funds beginning in 2021Q3 will result in accelerating growth with positive outcomes. A more robust GDP growth rate and consequent employment growth can be realized with the combined effects of the European recovery funds together with an enhanced public job guarantee program. It is this mix of policies that can gain traction and bear fruit in putting the Greek economy on a path to sustainable and inclusive growth. This Strategic Analysis is the joint product of the Levy Economics Institute of Bard College and INE-GSEE (Athens, Greece). It is simultaneously issued in both English and Greek.