Consumer prices will drop on average 1.6% this year before they begin an upwards trend next year when they are forecast to rise 0.6% and a further 1.3% in 2015, the European Commission said in its autumn forecasts on Thursday. Cyprus’ economy shrank 2.5% last year in which Cyprus posted a deflation rate of 0.3%.

Finance minister Harris Georgiades said on Tuesday that the Cypriot economy, which exited a prolonged recession in the first quarter of the year, will grow “somewhere around 1.5%” in 2015. In July, the European Commission revised once more its initial Cyprus forecast for a 0.5% contraction rate to 0.5%.

The unemployment rate is projected to drop to 15.6% this year from 16.1% in 2014, the Commission said. In 2016, the situation on the labour market will further ease and the jobless rate will drop to 14.6% next before falling to 13.3% in 2017.

Brussels’ economists also forecast a fiscal deficit of 0.7% of economic output in 2015 after the government generated an 8.9% fiscal deficit in 2014, a figure which includes the €1.5bn injected in to the Cooperative Central Bank. In 2016, Cyprus is forecast to generate a fiscal surplus of 0.1% which will increase to 0.3% in 2017. As a result of the forecast improved fiscal results, Cyprus will be able to reduce its public debt from 106.7% of gross domestic product this year to 98.7% in 2016 and 94.6% in 2017, the Commission said.

Finally, Cyprus’ current account deficit is expected to narrow from 3.5% of the economy this year to gradually 3% by 2017, the Commission added.

Source: Cyprus Mail