COVID19: Cyprus economy could take three years to recover

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Cyprus’ economy will take three years to recover fully post-coronavirus after suffering a 13% decline in 2020, according to the worst-case scenario in the Finance Ministry’s stability programme.

The worst-case scenario was part of the stability programme (for 2020-23) Cyprus submitted to the European Union on Friday and takes into account the effects of a fresh outbreak of the coronavirus in the autumn without an effective treatment or vaccine available.

The programme also includes a basic outlook and a more optimistic outcome of the coronavirus crisis.

Under the basic scenario, the ministry expects to see GDP shrinking by 7% this year as a result of the fallout from the pandemic.

The most optimistic outcome would see a 5% retraction in GDP.

“However, there are also downward risks in the event of a need for lengthier quarantine periods during the summer, though of a less restrictive nature than the current ones,” the ministry said.

The ministry refers to the risk of a new outbreak in the autumn “will exercise additional pressure on the economy which could see the economy shrinking by 13%”.

This year is projected to see the debt-to-GDP ratio increase to 116.8% but decrease to 103.2% of GDP by the end of 2021.

The ministry predicts the economy will regain ground in 2021 with a growth rate of 6%, in line with the European Commission forecasts.

Nicosia foresees that the growth potential will create the possibility of maintaining sufficiently high primary surpluses in the medium term.

It is also noted that from next year there will be a reduction in the debt-to-GDP ratio at a significant rate.
The government says it has taken all possible measures to enable the economy to withstand the external shock of the pandemic, through a comprehensive and targeted package of measures.

There is also an intention to take action in the future, if and where required for faster recovery.