Greek outlook bleaker than lenders think, local think tank calculates

Tue Jul 9, 2013 7:45am EDT
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By George Georgiopoulos

ATHENS (Reuters) - Greece's economy could shrink by as much as 5 percent this year, the Athens-based IOBE think tank said on Tuesday, revising down its previous projection and offering a more pessimistic forecast than the country's foreign lenders.

Athens, which has been limping along on bailout funds since 2010, secured its latest lifeline from its European Union and International Monetary Fund lenders on Monday but was told it must keep its promises on cutting public sector jobs and on selling state assets to get all the cash.

But the austerity prescribed by these lenders to shore up Greek finances is expected to keep the economy in depression for a sixth consecutive year and push already soaring, record unemployment to yet new highs.

"The projection on growth must be adjusted downwards - the recession this year will be around 5.0 percent," IOBE said in its quarterly report. It said it would range between a decline of 4.8 and 5 percent, compared with its previous forecast of a 4.6 percent slump.

The EU and IMF expect the economy to shrink by 4.2 percent in 2013; the Bank of Greece projects a contraction of 4.6 percent. The economy shrank 6.4 percent last year.

"Fiscal consolidation and improved competitiveness have not been coupled with successful implementation of the structural reforms program," the locally influential think tank said.

IOBE projected the country's unemployment rate will rise to 27.8 percent this year, raising its previous 27.3 percent projection. Unemployment was 26.8 percent at the last count.

"As long as the recession persists, the economy isn't only burning fat but also productive tissue," said Nikos Vettas, the new head of IOBE.   Continued...

A man casts his shadow as he walks through a deserted Athens shopping area , October 18, 2012. REUTERS/Yannis Behrakis (GREECE - Tags: BUSINESS EMPLOYMENT) - RTR399SL