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IMF keeps Cyprus GDP growth at 2.5%

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The International Monetary Fund (IMF) maintained its projection for Cyprus’ economic growth in 2023 at a slower 2.5%, while real GDP growth is expected to pick up the pace next year.

In its April 2023 World Economic Outlook (WEO), the IMF said that Cyprus’ real GDP would expand by 2.5% (as projected in October), with the economy gathering more pace in the following year, reaching a 2.8% GDP growth.

The Cypriot economy last year grew at a rate of 5.6%.

Inflation is expected to decelerate significantly this year, dropping to 3.9% from 8.1% the previous year.

In 2024 inflation will decelerate further to 2.5%, the IMF said.

It also maintained its projection for Cyprus’ unemployment rate at 6.5% this year from 6.7% in 2022, while in 2024, unemployment is projected to decline to 6.2%.

Cyprus’ current account deficit is projected at 7.8% of GDP this year and will ease to 7.2% in 2024. Last year the current account deficit was 8.8% of GDP.

Uneven growth

According to the IMF, the baseline forecast is for global output growth, estimated at 3.4% in 2022, to fall to 2.8% this year, 0.1 percentage point lower than predicted in January, before rising to 3% in 2024.

“A return of the world economy to the pace of economic growth that prevailed before the bevvy of shocks in 2022 and the recent financial sector turmoil is increasingly elusive,” IMF said.

Real GDP growth in Europe and the Euro area is estimated at 0.8% in 2023, while growth will accelerate to 1.7% and 1.4% in 2024.

The UK economy, a significant partner of Cyprus, especially in the tourism sector, is estimated to shrink by 0.3% this year but recover 1% of GDP in 2024.

Output in Greece is projected to reach 2.6% this year and decelerate to 1.5% in 2024, while real GDP in the US is estimated at 1.6% and 1.1% in 2023 and 2024, respectively.

The IMF notes that more than a year after Russia invaded Ukraine and the outbreak of more contagious COVID-19 variants, many economies are still absorbing the shocks, adding “the recent tightening in global financial conditions is also hampering the recovery.”

“As a result, many economies are likely to experience slower growth in incomes in 2023 amid rising joblessness.

“Moreover, even with central banks having driven up interest rates to reduce inflation, the road back to price stability could be long.

“Over the medium term, the prospects for growth now seem dimmer than in decades.”