Recession looms as Greek economy set to shrink

Yannis Stournaras

Yannis Stournaras

The Governor of the Bank of Greece Yannis Stournaras, said on Tuesday that he expectes the country’s GDP to contract by 8.0% under the worst-case scenario.

Stournaras made the comments during a new cycle of online meetings organised by the Delphi Economic Forum, adding that he envisages an economic recession of around 4% in 2020.

The governor clarified that the 4% figure was based on the assumption that the quarantine will last 1.5 months, and it takes under consideration the successful management of the crisis by the government and estimates made by Health Ministry novel coronavirus spokesman, professor Sotiris Tsiodras, otherwise the worst case scenario would be an economic recession of up to 8.0 pct.

Stournaras expressed his concern over a possible hit on Greek tourism and all related sectors, which cumulatively represent a 10% of GDP annually, equal to that of Italy or Spain.

He admitted that no crisis passes without an increase in non-performing loans, but avoided making any predictions, saying that new NPLs will be seen either in the second half of 2020 or early in 2021. He stressed that banks should assess the sustainability of their clients and offer credit to loyal clients, otherwise the coronavirus would become a long-term problem.

The central bank governor also reiterated the idea of a 'bad bank' should be examined again, if the market remained dysfunctional in the second half of 2020, whether on European or national level.