The Greek economy will return to sustainable growth next year, helped by increasing demand from abroad, improving competitiveness and results from widespread reforms, the Organisation for Economic Cooperation and Development (OECD) said on Wednesday.

In a report, the Paris-based organisation said it expected the country’s Gross Domestic Product (GDP) to shrink by 2.9 percent this year and to grow by 0.6 percent in 2012. The OECD also forecasts that the fiscal deficit will fall to 7.5 percent of GDP in 2011 and to 6.5 percent of GDP in 2012, from 10.4 percent in 2010, while the unemployment rate will rise to 16 percent this year and to 16.4 percent in 2012.

The inflation rate will slow to 2.6 percent in 2011 and to 0.7 percent next year, while the country’s current accounts deficit will fall to 8.6 percent of GDP this year and to 7.2 percent in 2012, from 10.4 percent in 2010.

The report noted that there were risks in the country’s course towards sustainable public finances and its return to economic growth.

“Several things could move in a negative direction in the international environment, including a further loss of confidence or a significant weakening of exporting markets. The government can do little to affect these factors. It can, however, continue implementing a fiscal consolidation and structural reforms programme. Any delay in these sector could damage credibility, worsening an already difficult situation,” the report said.

The organisation stressed that the success of the Greek programme depended mainly on “strict control of spending and further progress in dealing with tax evasion, combined with reforms to deal with chronic problems in fiscal management and labour and goods markets”.

OECD, in its economic outlook report, noted that the public debts of Greece, Ireland and Portugal will not be sustainable if market interest rates remained at high levels for long. “Even if governments move towards achieving their fiscal goals, their finances will not be sustainable if market interest rates remained at their current levels for long,” the organisation said, adding there were three policy options in case these three countries failed to regain market confidence:

First, continuing funding from the EU and the IMF with interest rates much lower than market rates.

Second, extending the maturity of existing debt for a very long period of time combined with lower interest rates.

Third, a widespread restructuring of debt.