IMF expects higher Cyprus deficit, slower growth

The Cypriot economy is headed for a ''sharp slowdown'' in 2009 – 2010 in an ''inevitable deterioration,'' which would boost fiscal deficit to 3.9%, the International Monetary Fund said on Monday.

In a concluding report after a visit to Cyprus, the IMF says that ''after some years of credit-financed overheating, the economy is headed for a sharp slowdown which will put pressure on the private sector, banks and the public sector to adjust balance sheets.''

Noting that Cyprus appears to be weathering the global crisis so far as it is the only country in the Euro area to record positive growth in the first quarter of 2009, the IMF points out that ''nevertheless the economy is headed for a sharp slowdown'', given Cyprus' close links with its key economic partners, the UK, Greece and Russia, already facing economic difficulties.