Year 2012 will be particularly difficult for the Cypriot economy, Finance Ministry said in a press release issued following the publication of the International Monetary Fund's forecasts for Cyprus in the framework of the April 2012 World Economic Outlook.
The Ministry points out that the divergence in the forecasts noted between the projections of IMF and the Ministry concerning growth rate for 2012 is due to the fact that the IMF has not taken into account positive prospects in the tourism and services sectors, for which the Ministry is expecting signs of improvement.
In its report published yesterday, the IMF projects a negative growth of 1.2% of GDP for 2012 and 0.8% growth in 2013, whereas the Finance Ministry projects a 0.5% negative growth for the current year.
''The estimates of the IMF and of the Ministry are in the same direction,'' the Finance Ministry notes, pointing out however that ''the divergence noted (between the IMF's and the Ministry's forecasts) is mainly due to the fact that the IMF has not taken into account the possibility for positive prospects in the sectors of services and tourism.''
''The Ministry expects that these sectors will show signs of improvement,'' it adds.
The Ministry also says that 2012 will be ''a particularly difficult year mainly because of the external global environment, which is significantly affecting small open economies such as Cyprus and because of the effort made by the government for the consolidation of the public finances and for the support of the banking sector.
Following the Greek sovereign debt haircut, the Cypriot banks, Bank of Cyprus and Cyprus Popular Bank must secure a capital buffer of 3.5 billion EUR by the end of June in order to achieve a 9% Core Tier 1 capital set out by the European Banking Authority.
With regard to unemployment, the Ministry agrees with the IMF's forecasts that unemployment will stabilize at high levels in 2013 (9.6%), noting that the main reason for this is the negative growth projected for 2012.
Furthermore, the Ministry reiterates it remains focused on maintaining its fiscal targets as well as on implementing growth enhancing measures and policies, which would assist the increase of employment.
Cyprus aims at containing its budget deficit at 2.5% GDP in 2012. Recently Finance Minister Vassos Shiarly has stressed that the Ministry will present additional measures that would correct any possible deviations from Cyprus' fiscal targets.
''At the same time in cooperation with the Central Bank of Cyprus the Ministry examines all parameters for the effective management of the challenges to the banking system,'' the release concludes.
