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

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

A cargo ship is moored at the Piraeus Container Terminal, near Athens, Greece, September 20, 2017. REUTERS/Alkis Konstantinidis

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 percent in 2016, statistics service ELSTAT said on Tuesday, 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 euros last year, down from 178.1 billion euros in 2015. Consumption dropped by an annual 0.3 percent, versus a 0.6 percent rise estimated by the agency in March.

“It’s a small change that has minor impact on other indices and on fiscal figures. It is a slightly weaker depiction of the real economy in 2016 due to the downwardly revised consumption expenditure,” said National Bank economist Nikos Magginas.

He said that the registered trend in consumption would also be a challenge for 2017.

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 percent in 2016 while the International Monetary Fund’s upwardly revised estimate saw GDP growth of 0.4 percent.

Greece’s leading IOBE think tank said on Tuesday the economy will expand by “slightly below” 1.5 percent this year and pick up to around 2 percent in 2018.

“The Greek economy’s growth rate in 2017 will be in the area of 1.3 percent, slower than was previously projected. Next year, growth will most likely accelerate to 2.0 percent or slightly higher,” IOBE said in its quarterly review.

The think tank’s projections are below government forecasts. The government, which faces a third review to its international bailout this autumn, has cut this year’s economic growth estimate to 1.8 percent from 2.7 percent in May.

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

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

Reporting by Lefteris Papadimas and George Georgiopoulos Additional reporting Renee Maltezou and Angeliki Koutantou; Editing by Karolina Tagaris/Jeremy Gaunt