Cyprus' economic recession in 2014 will be smaller than initially estimated by the International Monetary Fund after the conclusion of the 4th review of the country`s economic adjustment programme, according to data included in the IMF’s latest World Economic Outlook (WEO).
In its WEO, published on Tuesday, the IMF said that Cyprus` GDP will contract this year 3.2%, while in the revised Memorandum of Understanding the Fund projected a 4.2% contraction.
However the IMF maintained its forecast for a 0.4% growth of the Cypriot economy in 2015.
The Fund predicts that the rate of unemployment will stand this year at 16.6% and 16.1% in 2015, from 18.6% and 18.0%, respectively predicted in the Memorandum.
According to the WEO, in 2014 and 2015 Cyprus will sink into deflation as the Consumer Price Index will record negative rates of 1.1% and 0.8% respectively.
The IMF has reduced its estimates for the current account deficit for both 2014 and 2015, compared with the previous estimate. The Fund expects that in 2014 the deficit in the current account will fall to 1.1% of GDP, from 1.9% in 2013. For 2015, the IMF predicts further reduction of the deficit to 0.8%. Following the fourth assessment, the IMF expected for this year a small current account deficit of 0.1% and for 2015 a surplus of 0.2%.
The Fund said that “in the euro area a gradual, but weak recovery is projected to take hold, supported by a sharp compression in interest spreads for stressed economies and record-low long-term interest rates in core euro area economies”.
It noted that “growth is still weak in the euro area, with lingering risks of more protracted low growth and low inflation”, adding that the euro area “stagnated in the second quarter of 2014, with investments surprising on the downside in several large economies”.
“The outlook is for a modest recovery and subdued recovery” the IMF said, noting that growth -predicated on continued improvements in lending conditions and resilient external demand- is expected to average about 0.8% in 2014 and 1.3% in 2015.
Inflation will average about 0.5% in 2014 and 0.9% in 2015. The unemployment rate is projected to stand at 11.6% this year and drop to 11.2% in the next year.
EU`s GDP is expected to grow 1.5% in 2014 and 1.9% in the next year.
