Are we spending after the lockdown? The big wager of the second half of 2021

The Greek economy bets all chips on “red” in consumption in order to wake up after the lethargy of the many months of lockdown.

Combined with the return of tourism, the financial government staff expects an increase in revenue, and from the satisfactory course of May it is estimated that the second half will have the characteristics of recovery, while a significant percentage of the April revenue lag will be recovered.

Keys to the immediate growth of economic activity are mainly the strengthening of consumer spending, the spending of part of the accumulated savings of last year – which reached 24 billion Euros – and the increase of tourist traffic.

These factors are estimated to have a significant impact on the economy as private consumption accounts for about 70% of GDP.

About 11% GDP growth in May

The monthly index of the National Bank – which combines information from high frequency and economic indicators with fiscal and financial data – indicates an annual growth of economic activity of 9.7%, in April.

The positive trend seems to be further strengthened in May with this indicator predicting GDP growth of about 11% per year and 2.4% on a monthly basis, as more sectors of the economy reopen and uncertainty subsides.

In the whole of 2021 there are now strong chances that the annual GDP growth, which is predicted to exceed 4.7% by the basic scenario for the whole of 2021 .

This estimate incorporates a forecast for an annual increase in tourism revenue of 80% – with revenues, however, remaining 55% lower than in 2019 – which is still reasonable, based on early indications that tourism traffic has more than doubled since 3rd quarter of 2021 onwards.

During the first two months of 2021, the annual decline in VAT revenues for the General Government was milder (-10%, on average, compared to -24%, respectively, in the period March-December 2020), while in March 2021, is shows an increase of 31% compared to the same month

It is noted that, in March 2020, VAT revenues had decreased by 45%, on an annual basis.

Despite the fact that these figures fall short of the corresponding revenues of March 2019, the increased VAT revenues in March 2021, compared to the corresponding month last year, are an indication of the gradual rise of economic activity.

Cumulatively, in the first quarter, General Government VAT revenues were reduced, on an annual basis, compared to the same quarter of 2020, which, however, were little affected by the restrictive measures that began in mid-March.

According to the Weekly Developments Bulletin of Alpha Bank during the first months of 2021, and the course of the economic climate index (97.9 points, in April 2021, which was the best performance of the last 12 months), the domestic economy is expected to enter a mild recovery course, from the second quarter.

Considering that consumers are now more willing to increase their spending, especially in the service sector, albeit modestly, as restrictive measures are gradually being lifted and social distancing is softer due to the evolution of the Covid vaccination program.

At the same time, uncertainty is declining and consumer confidence and business expectations in retail are improving, which, as precursor indicators, essentially discount the strengthening of economic activity in the near future.

The index of business expectations in retail trade has registered, in April, positive gains (3.2 points), for the first time in the last 12 months.

The consumer confidence index has recovered almost 1/3 of the losses recorded in the period February-November 2020 and the sales of cars have increased rapidly in the two months March-April 2021, compared to the corresponding months of 2020.