articles | 11 October 2013

Economy to contract by 8.7% in 2013, according to IMF`s WEO

The Cypriot economy will contract by 8.7% in 2013, the IMF said, reflecting the rapid deterioration of the macroeconomic environment on the island.

According to the IMF’s World Economic Outlook, the Cypriot economy will decline by 8.7% in 2013 and by 3.9% in 2014, maintaining the same projections of the troika adjustment programme. The WEO expects the Cypriot GDP to shrink by 10.7% in the fourth quarter of 2013. Inflation is expected to be 1.0% in 2013 and to rise slightly to 1.2%in 2014. The current account deficit is expected to reach 2.0% this year and decline further to 0.6% in 2014. Unemployment is projected at 17% for 2013 and 19.5% in 2014.

The Cypriot authorities and the troika (EC, ECB and the IMF) agreed last March on a €10 billion bailout. The programme featured a deposit to equity conversion to recapitalise the island`s largest lender, Bank of Cyprus, whereas Laiki Bank, theisland`s second largest bank was to be wound down. “A specific concern was that the events in Cyprus could amplify financial fragmentation. Although further fragmentation did not happen, progress in reintegrating financial markets has been very limited,” the IMF noted.

Source: Cyprus Mail

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