Possibility of Grexit is now "remote", Greek cenbank says

ATHENS | Wed May 29, 2013 2:36pm

May 29 (Reuters) - Fears that Greece may exit the euro zone are now remote but its economy will stay in recession for a sixth straight year in 2013 and unemployment will rise further before recovery sets in next year, the country's central bank said on Wednesday.

The Bank of Greece sees the economy contracting by 4.6 percent this year, slightly more than a previous 4.5 percent forecast.

The jobless rate will peak at around 28 percent from currently 27 percent and will start declining in 2015, the central bank said in a monetary policy report.

The Bank of Greece expects consumer price deflation at an average rate of 0.3 percent this year, more than a previous forecast of 0.1 percent deflation. The core inflation rate, which excludes energy and food, is seen at -1.1 percent this year.

Urging the government to stay the course of reforms and meet fiscal targets agreed with international lenders, the central bank said achieving budget targets would bolster confidence and eliminate the need for more austerity measures.

"The climate is more favourable today for the speedier pursuit of policies aimed at translating the improvement in expectations into real economic activity," the Bank of Greece said in its monetary policy report. (Reporting by George Georgiopoulos; editing by Harry Papachristou)