“The recession is forecasted to persist in 2015, but the contraction of real activity is estimated to decelerate especially in the second half of the year,” the centre said today in an emailed statement. “Real gross domestic product growth for 2015 is projected at -0.9%”.
Real output is forecast to drop 1.7% and 1.2% for January to March and April to June, compared to the respective quarters last year, the centre said adding that economic output in the third and fourth quarters are expected to drop an annual 0.5% and 0.1% respectively.
The Cypriot economy shrank 2.3% last year, compared to an initial forecast -4.2% growth rate, after shrinking 5.4% in 2013.
Inflation this year is forecast to be -0.9%, compared to a 1.4% deflation rate in 2014, the centre said.
The economic research centre said that a stabilisation in domestic economic activity and the labour market, a decline in domestic prices triggered by decreased energy prices, expectations for stronger growth in the euro area, increased economic sentiment at home and a weaker euro against the British pound, which will make Cyprus more attractive to tourists from the United Kingdom, are some of the factors which will mitigate this year’s recession.
On the other hand, high indebtedness levels and lack of bank credit, Russia’s economic downturn and the weak rouble, uncertainty over Greece’s economy and the weak performance of European financial markets in the last quarter of last year, which reflected uncertainties about the recovery of the European economy, are factors which are likely to prevent the Cypriot economy from recovering at a faster pace, the economic research centre said.
A deterioration of economic conditions in Russia leading to a stronger devaluation of its currency, a new euro crisis triggered by uncertainty in Greece and further delays or complications in the implementation of reforms included in Cyprus’s economic and financial reform programme agreed with international creditors, such as those aimed at addressing the non-performing loans situation in the banking system, could potentially further affect growth negatively this year, the centre said.
“Upside risks to the outlook include the accommodative monetary policy stance announced by the European Central Bank, which is expected to improve the liquidity of the domestic banking system, when Cyprus becomes eligible for participation in the programme,” the centre said.
Additional upside risks for this year’s economic growth could result from improved euro area growth prospects, robust growth in the UK combined with the weakening of the euro against the British pound, investments in the tourism or energy sector as well as public investment efforts to expand existing infrastructure, the centre said.
Source: Cyprus Mail
