IOBE forecasts 5 pct contraction

The economy will continue to shrink dramatically, at a rate of at least 5 percent this year, while unemployment will remain around 20 percent, according to a report published on Monday by the prestigious Foundation for Economic and Industrial Research (IOBE).

The report suggests that the forecast for a 5 percent contraction is optimistic, adding that investment will drop by 10.2 percent after a 20.8 percent decline last year, private consumption will shrink by 8.1 percent (-7.1 percent in 2011), public spending will fall by 9.5 percent (-9.1 percent in 2011) and the deficit will come to 7.5 percent of gross domestic product, down from an estimated 9.9 percent in 2011.

The public debt will go down to 159 percent of GDP from 165.3 percent last year.

IOBE General Director Yannis Stournaras warned against government instability during such a critical period.

?It would not be good for the country to find itself in a process of repeated elections,? he said.