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COVID19: Cyprus economic recovery uncertain without vaccine

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Cyprus said the European Commission’s Autumn Economic Forecast is in line with government estimates of recession this year and rebound in 2021 but the outlook remains uncertain without a coronavirus vaccine.

The Finance Ministry said the forecast reaffirmed that government measures to support employees and businesses are on the right track.

“It also reaffirms that the crisis is not over and the path to recovery will be difficult and uncertain, as well as the course of the pandemic and efforts to find a vaccine, which is directly related to economic consequences,” said the ministry statement.

The EU forecast reveals the severe impact of the pandemic on the European economy, by revising growth projections downwards for 2021.

According to the European Commission, the European economy is worse off than initially anticipated, while the Eurozone is set for a deep recession in 2020, expected to shrink 7.8% GDP.

The forecast for Cyprus is a 6.2% GDP recession for 2020, 1.2% less compared to the May forecast, while the economy is expected to grow by 3.2% in 2021 due to increased consumption and investments.

The Ministry also says that the report acknowledges that the Cyprus government’s program to tackle the impact of the pandemic helping to support jobs and income available to households and businesses while curbing the impact on domestic demand.

It said the report identifies a deterioration in fiscal indicators, with the deficit in 2020 reaching 6.1% of GDP, before receding to 2.3% next year due to the economy’s gradual recovery and a consequent improvement in public revenues.

The public debt as a percentage of GDP is expected to reach 112.6% by the end of 2020 before returning to its downward trend.

“The impact of the pandemic on unemployment and businesses is expected to become visible by the end of 2021, underlining the need to continue pursuing a prudent financial policy on a national level.”

The ministry said there was a pressing need to swiftly implement the recovery and resilience plan, incorporated in the 2021 state budget.