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Business confidence almost at levels seen in February 2020
As Europe begins to ramp up vaccination rollouts, countries such
as Greece, where the tourism sector is vital to the wider economy,
have an additional pressure to maintain vaccine take-up across the
population to ensure visitor bookings. The recent reopening of the
service sector has boosted sales at some manufacturers, but for a
broader economic recovery to take hold and be sustained Greece
requires travel restrictions to loosen in key markets and
confidence in the safety of travel to be re-established among
customers.
As the economy has gradually reopened through 2021 so far, the
manufacturing sector has strengthened from the historic lows seen
in 2020. The IHS Markit Greece PMI Manufacturing Output Index
signalled the strongest expansion in production for over two years,
boosted by a significant upturn in new orders. Anecdotally, many
firms mentioned that the relaxation of virus-fighting restrictions
early in May had driven client demand.
Manufacturing sector building strength once
more
In February 2020, the Greek manufacturing sector was signalling
a marked upturn in production and a second successive monthly
acceleration in the rate of new order growth. However, the pandemic
and associated lockdown restrictions soon plunged the Greek
manufacturing sector into decline. Output fell at the sharpest pace
on record in April 2020, with the seasonally adjusted index
dropping some 41.3 points in just two months.
After a year of moves towards recovery which were often stifled
by a resurgence in COVID-19 cases and renewed lockdowns, the
manufacturing sector indicated the first rise in output for seven
months in April 2021. The expansion gained notable ground in May,
with the rate of production growth the steepest since April 2019.
In fact, our current forecast signals a 2.8% increase in output in
2021 compared to 2020. This rise in production is expected to
outstrip the decline seen in 2020, with the manufacturing sector
likely to return to pre-pandemic levels by the end of the year.
In fact, goods producers registered historically elevated levels
of optimism regarding the outlook for the coming 12 months in May.
The degree of confidence in a rise in production over the coming
year rose to the highest since February 2020, amid stronger
domestic and foreign client demand, and a hopes of a successful
vaccination rollout.
Short terms challenges remain, however, as significant supply
chain disruptions drove cost burdens up markedly in May. Although
still substantial, pressure on supply chains seemingly eased
marginally, as supplier delays lengthened to a slightly less marked
degree during the month. That said, longer delivery times continued
to exert strain on cost burdens as input prices rose at the
sharpest pace on record (since data collection began in May
1999).
Service sector outlook less certain
Although the outlook for the manufacturing sector is reasonably
rosy given ongoing restrictions and pandemic uncertainty, the
driving force that is the service sector has a greater number of
hurdles to jump before a significant recovery can be noted.
Greece's service sector is heavily based around the tourism
industry, which in turn is reliant on successful vaccination
rollouts, as well as a revival in customer confidence in leisure
travel and the further easing of international restrictions.
Although some travel certificates and bridges have been
announced for the summer season 2021, many of the key markets Greek
firms would expect to receive tourists from remain cautious to
encourage international travel without restrictions or quarantine
measures attached. Our current expectations do not put the tourism
sector recovering to pre-pandemic levels until at least 2022, and
this is of course dependent on no further large spikes in cases in
the latter stage of 2021 or a slowdown in vaccine rollouts, which
would further delay the reopening of borders and leisure
travel.
At the time of writing, just over one-in-four Greek citizens
were fully vaccinated. This proportion is much higher when
focussing on the popular Greek island tourist destinations as it is
hoped all citizens in these areas will be fully vaccinated by the
end of June to coincide with the summer holiday season.
Forthcoming economic data releases:
1st July 2021: IHS Markit Greece Manufacturing PMI (June)
7th July 2021: IHS Markit Europe Sector PMI (June)
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
