Greece's beleaguered economy will further contract by almost 5% of output this year, the Greek central bank said today.

It revised a previous forecast and warning of deeper unemployment woes.

"The bank estimates that the average annual rate of GDP reduction will approach 5% in 2012," Bank of Greece governor George Provopoulos said.

He made his comments as he released the bank's annual report on the Greek economy.

In March the central bank had forecast a 4.5% contraction. The Greek economy last year contracted by 6.9%, Provopoulos said.

In 2012, average unemployment is expected to exceed 19%, compared with 17.7% last year, while inflation should drop to 1.2%.

Speaking two weeks before elections scheduled for May 6, Provopoulos said that "full readiness" was required immediately after the ballot to help Greece steer through uncertainty exacerbated by the euro zone's burgeoning debt crisis.

Failure to do so would negate two years of austerity sacrifices and drastically undermine living standards, he warned.

"The electoral campaign has slowed down the implementation of planned reforms," Provopoulos said. "If the will of the new government and of society to implement the recovery programme is called into question after the election, the country risks running into a particularly difficult situation," he warned.

Greece has benefited from two rescue packages backed by the European Union and International Monetary Fund, and has reached agreement with private creditors to cancel €105 billion in debt, roughly half of the money they were owed.

According to government forecasts, Greece plans to cut the public deficit to 7% of GDP this year, and reduce its debt to 145.5% of GDP.

Provopoulos urged the adoption of a privatisation drive designed to bring €19 billion in sales by 2015 and the recapitalisation of private banks that took heavy losses in the voluntary state debt cut in March.

"Private bank deposits fell by over €70 billion between the end of 2009 and February 2012," the governor said. "The restoration of confidence could initially restore €10-15 billion in deposits," he said.