UPDATE 2-Greece’s economy experiences record slump, reversing hard-earned gains

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(Updates throughout, adds quotes)

ATHENS, Sept 3 (Reuters) – Greece’s GDP shrank 14% between April and June, marking the biggest quarterly contraction in at least 25 years and threatening to undermine a decade of hard-won gains for the recently bailed-out economy .

The record fall, announced by statistics service ELSTAT on Thursday, confirmed expectations of a sharp contraction in the second and third quarters, induced by the lockdown authorities imposed in March to contain the coronavirus.

Data showed that tourism, the main driver of the economy, had been hit hard by COVID-related travel restrictions, and among eurozone countries only the Spanish economy, with a drop of 18.5 % of gross domestic product, performed less well in the second quarter.

Greece lost around a quarter of its output in its 2010-2018 debt crisis, which rocked the eurozone and forced it into bailouts in exchange for unpopular austerity-focused reforms.

However, during this period, the economy’s worst quarterly contraction, in the first three months of 2009, was a relatively modest 4.7%, according to ELSTAT.

Greece emerged from its third bailout in August 2018.

It still has the highest debt-to-GDP ratio and expected a strong recovery this year, but with the impact of the pandemic the economy is now expected to contract by up to 10% in 2020. On an annual basis , it contracted by 15.2%. in the second trimester.

TOURISM AFFECTED

Last year, tourism receipts totaled 19 billion euros. The sector accounts for approximately 18% of GDP and one in five jobs.

Greece only started easing travel restrictions in May, just before the start of its peak tourist season, and in the second quarter services exports – which include tourism receipts – fell 48.3% compared to the first.

“Mediterranean countries have suffered a severe blow. In major European cities, including Athens, there are no tourists at all,” Grigoris Tassios, president of the Greek Hotel Association, told Reuters.

“There was no tourism revenue in the second quarter,” he added, forecasting 3 billion euros over the whole of 2020.

The data also showed consumer spending fell 11.3% as business activity came to a halt, while bank deposits rose.

Electronic transaction and tax revenue data would help offset the impact on tourism, the government said, reaffirming its estimate of an 8% GDP contraction this year. Prime Minister Kyriakos Mitsotakis predicted a strong economic rebound next year.

Nikos Magginas, chief economist at the National Bank, was also relatively optimistic, saying Greece’s economic rebound had been faster than that of other southern European countries once restrictions were lifted.

But the hoteliers’ projections were bleaker.

“It will take us three years to return to the tourism performance of 2019,” said Emannuel Giannoulis, vice president of the hoteliers’ association. (Reporting by Angeliki Koutantou and Lefteris Papadimas; Writing by Renee Maltezou; Editing by John Stonestreet)

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