According to the WEO, unemployment in 2014 will peak at 19.2% compared with the previous projection of 19.8% and will decline to 18.4% in 2015 amid modest economic growth. IMF staff estimates that the rate of unemployment has started showing signs of deceleration during the last months of 2013.
The Cypriot economy will shrink by 4.8% in 2014 and will return to a modest growth of 0.9% of GDP in 2015.
Inflation is projected to remain in the 2013 levels, that is 0.4% will increase to 1.4% in 2015. Although Cyprus registered deceleration trends following the €10 billion bailout agreed in March 2013, the IMF staff report estimates that average inflation in 2014 to remain around last year’s level, with recent downward pressures to be offset by a stabilization of utility prices and by the pass through to prices of VAT increases taking effect this year.
Cyprus’ current account balance from -1.5% of GDP will reach a surplus of 0.1% in 2014 and will increase to 0.3% of GDP in 2015. According to the WEO, “acute risks have decreased, but risks have not disappeared.”
IMF economic counselor, Olivier Blanchard believes that the recovery in the United States seems solidly grounded. In Japan, Abenomics still needs to translate into stronger domestic private demand for the recovery to be sustained. “Adjustment in the south of Europe cannot be taken for granted, especially if Euro wide inflation is low,” the report adds.
Source: Financial Mirror