Local
articles | 22 December 2016

CBC sees growth rate at 2.8% in 2016, 2017

The Central Bank of Cyprus said that it expects the economy to expand at an annual rate of around 3% over 2017 until 2019 and upgraded its 2016 projection marginally upwards to 2.8%, as inflation is expected to pick up.

The Cypriot economy is forecast to grow 2.8% also next year before growth picks up to 3.1% in 2018, the bank supervisor said on Thursday in its economic bulletin on its website. Growth in 2019 is forecast to slow down to 3%.

“The better than expected course of the Cypriot economy reflects that of all main productive sectors,” the central bank said.

Private consumption which rose 2.5% last year, is expected to continue to increase 2.1% every year over the next three-year period reflecting an increase in disposable income, the central bank said. Fixed capital investment is forecast to increase 1.3% next year, after rising 19% this year, and 7.4% and 6.5% in 2018 and 2018 respectively and will include the expansion of the fuel storage terminal in the Vassilikos area, the Larnaca and Agia Napa marinas, as well as other projects financed by the European Investment Bank and the European Bank of Reconstruction and Development.

Public consumption is forecast to rise 1.6% next year after shrining 0.5% in 2016, before it rises 1.2% in 2018 and 2% in 2019, the central bank said, as the government will start paying compensation to public sector workers for the purchasing power lost to inflation.

The harmonised consumer price index is projected to drop 1.2% this year before it recovers 0.9% in 2017 and 1.5% and 1.6% in 2018 and 2019 respectively, it said. The core inflation rate, which excludes energy products, is expected to be -0.5% this year and accelerate to 0.5% in 2017.

The export of goods and services are forecast to increase 2.6% this year and pick up to 3.4% in 2018 and 2019, following a 4.4% increase in 2016, it continued. Imports will increase 1.1% next year before rising 3% and 3.1% in 2018 and 2019 respectively. This year, they are projected to rise 5.1%.

The unemployment rate is expected to drop from 14.9% in 2015 to 12.8% this year to 10.7% in 2017, the central bank said. In 2018 it will drop for the first time to 8.8%, and for the first time since 2012 to a one-digit figure, before it further drops to 6.9% in 2019.

The central bank said that unemployment remained below what Cyprus’s international creditors had predicted “mainly because of the significant reduction of foreign workers in Cyprus, the ongoing recovery in employment and the flexibility demonstrated by the Cypriot labour market concerning salaries”.

“Still, until 2019, it is expected to remain above the pre-crisis average,” it added.

Source: Cyprus Mail

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