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Worst-Case Scenario for Greece is Eight Percent Recession, Says BoG Chief

Bank of Greece. File photo

Estimates of a ten percent economic contraction this year were excessive, Bank of Greece (BoG) governor Yannis Stournaras said on Tuesday, while noting that he still expected the country’s GDP to shrink by 8.0 percent under the worst-case scenario.

Speaking during a new cycle of online meetings organized by the Delphi Economic Forum, the Greek central banker said that the bank’s basic scenario, formulated on current data, envisages an economic recession of around 4.0 percent in 2020.

This scenario is based on the assumption that the quarantine will last 1.5 months, and taking under consideration the successful management of the crisis by the government and estimates made by Health Ministry coronavirus spokesman, professor Sotiris Tsiodras.

The adverse scenario of the central bank envisages an economic recession of up to 8.0 percent.

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

He admitted that no crisis takes place without an increase in non-performing loans, but he avoided making any predictions in that area, saying that new NPLs will be seen either in the second half of 2020 or early in 2021.

Stournaras stressed that banks should assess the sustainability of their clients and offer credit to loyal clients — otherwise, the coronavirus would become a long-term economic problem.

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

Source: AMNA

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