By George Georgiopoulos and Lefteris Papadimas

ATHENS (Reuters) - Recession-hit Greece on Monday predicted a return to growth in 2017 and a drop in its huge debt burden via a tax-heavy draft budget submitted to parliament, pledging to meet the reform targets of lenders throwing it a financial lifeline.

In the throes of the worst recession in generations which has wiped a quarter off output since 2008, authorities predicted a 2.7 percent economic expansion, propped up by the trickle-down impact of bailout cash inflows and resurging private demand.

"Although the 2.7 percent GDP forecast for 2017 appears challenging, we believe next year's fiscal target is attainable assuming domestic macroeconomic conditions improve in the coming quarters," said Eurobank chief economist Platon Monokroussos.

Greece signed up to an international bailout deal - its third since 2010 - in mid-2015. It has received about 240 billion euros in all bailout loans so far, and is the most indebted country in the euro zone. In 2017, its debt will be equivalent to 174.8 percent of gross domestic product, four points down from this year.

The country, where one in four is unemployed, was expected to show a 0.3 percent drop in output this year, the draft submitted to parliament said.

TAX HEAVY

Unemployment was expected to ease to 22.8 percent from 23.5 percent this year, which is more than double the euro zone average. The primary surplus - the fiscal balance excluding debt servicing costs - was anticipated to reach 1.8 percent, compared to a slightly-above-target 0.63 percent in 2016.

The full impact of tax measures taken by the left-wing government last May were expected next year. They included raising pension contributions, a sharp increase in a 'solidarity levy' supposed to help the jobless, overhauling income tax rates and new taxes on everything from coffee to tobacco and beer.

It also means additional cutbacks in benefits and top-up payments to pensioners; the state wage and pensions bill was expected to be cut by six billion euros next year.

Public resentment brought hundreds of pensioners out to march in central Athens earlier on Monday over cutbacks to benefits.

Police used teargas when some of them attempted to overturn a police bus blocking the pensioners' path towards the official residence of leftist Prime Minister Alexis Tsipras.

"Is it possible that I should pay the same real estate tax as a rich businessman?" asked Nikos Saslov, a civil servant due to retire next year.

"If they (the government) are leftists, then I'm Sophia Loren," the greying man in sandals said, referring to the Italian actress.

(Writing by Michele Kambas; Editing by Janet Lawrence)