By Rahul Karunakar
(Reuters) - The outlook for Greece's economy has improved but analysts say the revival in investor sentiment that led Athens to tap the bond markets again this month still needs to be backed up by better data, a Reuters poll found.
After six straight years of recession that has reduced the economy by about a quarter of its size and driven unemployment to a record of nearly 28 percent, Greece's economy is expected to begin a long road to recovery this year.
Thursday's poll of nearly 35 economists and strategists taken in the past week pointed to an expansion of just 0.3 percent this year, lower than the EU/IMF projection of 0.6 percent the Greek central bank's forecast of 0.5 percent growth.
Those growth projections are not far behind consensus expectations for the euro zone economy as a whole.
"There are increasing signs the Greek economy is stabilizing and we expect to see a positive reading in terms of GDP growth at some quarter down the road this year," said economist Angelos Tsakanikas at IOBE, a research firm.
Greece has been dependent on international rescue funds since 2010 in exchange for deep spending cuts and reforms to correct its fiscal imbalances. But even after all that, it has debts equivalent to 170 percent of its gross domestic product.
Athens managed to end its four-year exile from debt markets earlier this month, raising 3 billion euros with a five-year bond as recovery prospects lured back some investors in search of yield, many of them hedge funds.
It offered a yield of 4.95 percent, the second-lowest borrowing cost for a bailed-out euro zone country returning to the market and well below peaks of over 30 percent traded in the market following a March 2012 restructuring that imposed heavy losses on private debt holders.
"Greece's return to bond markets is a positive first step. It can help bring liquidity to the economy and finance growth. Expectations have changed for the better, what remains is for them to be confirmed by the macroeconomic metrics that follow," added Tsakanikas.
Similar to Greece, Ireland made a strong return to bond markets at the beginning of the year after completing a bailout programme in December.
Ireland's economy is expected to outpace other peripheral countries and grow 1.7 percent in 2014 and 2.5 percent in 2015.
Portugal, which is set to exit its international bailout in May, is expected to post its first year of growth in 2014, 1.2 percent, after its deepest recession since the 1970s stoked by austerity measures imposed under the 2011 bailout.
The economy started to recover last year, but GDP still shrank 1.4 percent for all of 2013.
Helped by an improving economy, the country beat its budget deficit reduction target set under the bailout programme last year, cutting the gap to 4.9 percent from 6.4 percent in 2012. Economists say this year's target of 4 percent will be met.
"In general our scenario is that of accelerating economic growth, unemployment stabilizing at high levels and the continuation of the course of fiscal consolidation," said Paula Carvalho, chief economist at Banco BPI in Lisbon.
"There are known constraints, but structural reforms and changes already implemented, along with further efforts to make the economy more exports-oriented, should make possible more visible improvements in the longer term."
Spain is also expected to escape recession with 0.8 percent growth in 2014, slightly better than expected in the last poll, followed by 1.3 percent in 2015.
But more than one in four people are out of work, and the jobless rate won't average below that until next year, according to the poll. Spain's budget deficit as a percentage of GDP will still average more than 5 percent of GDP next year.
(Polling and reporting by Ashrith Doddi in Bangalore, George Georgiopoulos in Athens, Andrei Khalip in Lisbon, Padraic Halpin in Dublin and Paul Day in Madrid; Editing by Hugh Lawson)