BRUSSELS, Oct 15 (Reuters) - Greece's IOBE think-tank projected that the economy will contract less than it had previously estimated, helped by a better performance in the second quarter of the year, a peak tourism season for the country.
In its quarterly report released on Thursday, IOBE estimated the economy will contract by 1.5 to 2.0 percent this year. In its July report it forecast a 2.0-2.5 percent contraction.
After protracted negotiations with its EU/IMF lenders, Greece signed up to a 86 billion euros bailout in August which is keeping the cash-strapped country afloat.
Capital controls imposed in late June, new austerity measures in exchange for the bailout and damaged investor confidence were expected to hurt output in the second half of this year, the Athens-based economic research institute said. However, tourism revenues are expected to hit a new record high this year.
"Economic growth by 1.6 percent in the second quarter, slightly higher than expected, will mitigate recession for the full year," IOBE said.
It said there were grounds for a return to growth in the second half of 2016 provided the government sticks to its bailout programme and shores up the battered banking system.
The economy grew 0.7 percent in 2014, emerging from a six-year recession. It expanded by 1.1 percent in the first six months of this year but it is expected to slip back into contraction in the second half, hurt by the capital restrictions and lower consumer spending.
Greece's international lenders see the economy shrinking by 2.3 percent this year and 1.3 percent in 2016. (Writing by Angeliki Koutantou; Editing by Paul Taylor)