Despite a supply chain crisis, the International Monetary Fund revised 1.8 percentage points upwards the growth rate of the Cypriot economy this year to 4.8% GDP, compared to its forecast in April.
According to the World Economic Outlook (WEO), the growth rate of the Cypriot economy for 2021 will be 4.8% from a COVID-sparked recession of 5.1% recorded in 2020.
The growth rate for 2021 was projected at 3% in April’s WEO.
Growth for 2022 is estimated at 3.6%, compared to the higher 3.9% projected in April.
According to the IMF, unemployment is expected to fall from 7.6% in 2020 to 7.5% in 2021, further reducing to 6.9% in 2022.
The inflation forecast is also revised upwards, as the IMF estimates it will rise to 1.7% from -1.1% in the previous year and 1% in 2022.
In its spring forecast, the IMF predicted that inflation would reach 0.5% in 2021 and 0.8% in 2022.
The current account deficit is also projected to increase; according to the IMF, it will drop to 9.3% from 11.9% of GDP in 2020 and will fall to 7.4% in 2022.
Based on the forecasts of Cyprus’ Ministry of Finance included in the 2022 budget, the growth rate is expected to reach 4% GDP in 2022 from an estimated growth of 5.5% in 2021.
Concerning global growth, the IMF projection for 2021 has been revised marginally to 5.9% from 6% and unchanged for 2022 at 4.9%.
“The global recovery continues, but the momentum has weakened, hobbled by the pandemic. Fuelled by the highly transmissible Delta variant, health risks abound, holding back a full return to normalcy.”
The IMF also notes that pandemic outbreaks in critical global supply chains have resulted in longer-than-expected supply disruptions, further feeding inflation in many countries.
“Overall, risks to economic prospects have increased, and policy trade-offs have become more complex.”
It also highlights the foremost policy priority to vaccinate adequate numbers in every country and prevent more virulent virus mutations.