ECONOMY

IOBE paints bleaker economic picture for 2011

Greece?s economy is seen shrinking at a faster rate than the government expects this year, sending unemployment well above the 15 percent mark, according to the Foundation for Economic and Industrial Research (IOBE).

Think tank IOBE said the Greek economy is expected to contract by an annual rate of ?up to 3.2 percent? this year, versus the government?s forecast for contraction of 3 percent, due to plunging private and public consumption.

?Already high unemployment, changes to private sector labor relations and public sector salaries will put pressure on consumption spending this year,? IOBE said in its quarterly report on Thursday.

?Public sector consumption will also clearly be at lower levels for a second year.?

According to the latest data available, the Greek economy shrank at an annual pace of 6.6 percent in the last quarter of 2010, contracting for the tenth straight quarter, as uncertainty arising from the debt crisis hurt investments and household spending.

Finance Minister Giorgos Papaconstantinou believes the downturn has entered shallower water and expects a return to growth within the year.

On the job front, IOBE forecasts that Greece?s unemployment rate will keep rising to an average of 15.5 percent in 2011, adding that it will take some time for employers to adopt recently introduced flexibility to labor laws and boost job growth.

In the last quarter of 2010, Greece?s jobless rate jumped to 14.2 percent, from 12.4 percent in the previous three months, resulting in a total of some 712,000 workers being out of work. The country?s work force numbers about 4.2 million people.

Some respite in the economy may come from easing inflationary pressure, IOBE added, as plunging demand helps consumer price hikes slow to nearly 3 percent in 2011, down from 4.7 percent last year.