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Greece, in recession again last year, eyes recovery in 2017-18

The Greek economy contracted by 0.2% in 2016
The Greek economy contracted by 0.2% in 2016

Greece fell into recession again last year, confounding its international creditors who had predicted some growth after years of budget austerity and bailouts. 

The country's leading economic think tank, meanwhile, said there would be growth this year - but not as much as the government expects. 

The economy contracted by 0.2% in 2016, statistics service ELSTAT said today, releasing its revised estimate of full-year gross domestic product. 

ELSTAT's estimate, based on seasonally unadjusted data, was based on lower than previously estimated household consumption, suggesting that the euro zone's largest unemployment rate is still holding back broader recovery. 

It said gross domestic product in volume terms and measured at constant prices was €175.9 billion last year, down from €178.1 billion in 2015. 

Greek consumption dropped by an annual 0.3% compared to a 0.6% rise estimated by the agency in March.

Years of austerity imposed by the International Monetary Fund and euro zone lenders in exchange for bailouts have made many Greeks far poorer and shrunk consumption accordingly. 

The European Commission, in its winter forecast published in February, projected GDP growth of 0.3% in 2016 while the International Monetary Fund's upwardly revised estimate saw GDP growth of 0.4%. 

Greece's leading IOBE think tank said today the economy will expand by "slightly below" 1.5% this year and pick up to around 2% in 2018. 

"The Greek economy's growth rate in 2017 will be in the area of 1.3%, slower than was previously projected. Next year, growth will most likely accelerate to 2% or slightly higher," IOBE said in its quarterly review.

The think tank's projections are below government forecasts. 

Greece's government, which faces a third review to its international bailout this autumn, has cut this year's economic growth estimate to 1.8%t from 2.7% in May.

The Commission has also cut its forecast to 2.1% from 2.7%. Greece's central bank sees gross domestic product growing by 1.7% this year and picking up to 2.4% in 2018. 

Economic recovery will be key to bringing down a Greek jobless rate of 21%, the highest in the euro zone, and attaining a primary budget surplus of 1.75% - excluding debt servicing outlays - this year as demanded by Greece's creditors.