Greek economy may grow in 2014, unemployment to dip- IOBE think tank

ATHENS, April 16 Wed Apr 16, 2014 7:35am EDT

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ATHENS, April 16 (Reuters) - Greece's economy will stabilise this year after a six-year recession and may manage a small expansion, think tank IOBE said on Wednesday, projecting that unemployment will ease by one percentage point to 26 percent.

The Athens-based research institute also said Greece's return to bond markets earlier this month after a four-year exile would encourage banks to raise funds in the same way and this would help improve the flow of money through the economy.

IOBE took a slightly more optimistic view compared with a previous quarterly review in January, when it projected that national output could still contract a little this year.

The government and its international lenders project Greece's 182 billion euro ($252 billion) economy will pull out of recession and expand by 0.6 percent in 2014, while the national central bank projects growth of 0.5 percent.

Greece's jobless rate, which dipped to 26.7 percent in January, remains more than twice the euro zone average.

"With the Greek economy at a turning point, one of the factors that will determine whether GDP (gross domestic product) expands is tourism activity, which has a high weighting in national output," the Foundation of Economic and Industrial Research said in its quarterly review.

It forecast that last year's 15.5 percent tourism surge in terms of foreign visitors would continue this year, without providing numerical forecasts.

IOBE forecast that consumer price deflation will persist and prices will fall on average by 0.6 percent this year. Greek consumer prices fell 1.3 percent year-on-year in March, faster than in the previous month.

The protracted recession, coupled with wage cuts and substantial spare capacity in the economy, exerts downward price pressures - part of an internal devaluation process expected to boost Greece's economic competitiveness.

Underlining reviving confidence, two of Greece's top four banks have already raised 2.95 billion euros between them through equity offerings to plug capital shortfalls, with another 5.5 billion euros worth of fund raising in the pipeline by Eurobank and National Bank.

"The strong interest by foreign investors is proof of the increasing confidence in the viability of the country's banking system," the think tank said. ($1 = 0.7234 Euros) (Reporting by George Georgiopoulos; Editing by Ruth Pitchford)

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