The Greek economy is forecast to further shrink by at least 3 percent in 2011, the Bank of Greece ( BOG) said Tuesday in its annual monetary policy report.
Greece must continue fiscal consolidation policies and accelerate deep structural reforms, focusing on measures to boost competitiveness, said BOG Governor George Provopoulos, who formally submitted the annual 2010-11 report to the Greek parliament.
The Greek economy has been hit hard by a crisis since 2009 and narrowly escaped default last year with the support of the International Monetary Fund and the European Union. It is expected to continue contracting this year, but at a slower pace than the 4 percent estimated in 2010.
Unemployment is expected to further increase in 2011, while inflation, which currently stands at more than 5 percent, is forecast to drop to 2.2 percent by year end.
BOG analysts retain optimism that Greece can reduce a budget deficit which was slashed in 2010 to 9.4 percent of GDP from 15.4 percent in 2009 to less than three percent by 2014, according to the target and timetable of the Stability and Growth program.
Regarding the state of Greek banks, the report noted that they face challenges, as the total of non-performing loans increased to 28 billion euros ( 37.8 billion U.S. dollars) in 2010 from approximately 18 billion euros ( 24.3 billion U.S. dollars) in 2009.
The banking system's capital adequacy remains at satisfactory levels for the moment, it added.