Cyprus economy expected to mark 3.5% negative growth in 2013

The projections are based on the assumptions and data available as at 23 November 2012.

According to the Economic Bulletin, issued by the CB, the expected shrinkage of the Cyprus economy is due to the domestic demand.

For 2012, Cyprus GDP is expected to mark a decrease of 2.4% as result of the deterioration of the domestic negative atmosphere. The projections for 2012 have been significantly revised downwards, compared with those of June 2012 due to the negative course of the Cyprus economy and the adoption of austerity measures, which are included in the draft agreement of a Memorandum with Troika (IMF, ECB, EC).

The rate of unemployment in Cyprus, according to the projections of the Central Bank, is expected to reach 12% in 2012, 13.7% in 2013 and 14.2% in 2014. The projections for the unemployment rate have been significantly revised downwards, compared to previous projections, as a result of the projections for the shrinkage of the economy.

With respect to inflation, the CB forecasts that it will slow down to 3.1%, compared to 3.5% in 2011. In 2013, the CB forecasts that the inflation will mark a further decrease and will fall to 1.5%, despite the increase in tobacco, alcoholic drinks, and oil prices and the increase of VAT, which are included in the Memorandum with Troika. In 2014, inflation will reach 1.3.

The Central Bank notes that the private consumption is expected to register a decrease of 4.8% in 2012, compared with an increase of 0.2% in 2011. This is verified by some indexes, such as the retail sales, which marked a decrease of 3.2% in August 2012.