Cyprus’ GDP is projected to contract by 6.5 percent this year as a result of measures and policies being taken worldwide to contain the COVID-19 pandemic, the International Monetary Fund (IMF) has said in its latest World Economic Outlook.
Assuming no recurrence of the pandemic next year, the IMF estimates that the Cyprus economy will rebound in 2021 with a 5.6 percent growth in GDP.
The previous World Economic Outlook, published in October last year prior to the coronavirus outbreak, had projected the Cypriot economy would grow by 2.9 percent in 2020.
Inflation in Cyprus will come to 0.7 percent this year, speeding up slightly to 1.0 percent in 2021.
Unemployment is forecast to rise to 8.8 percent in 2020 – up from 7.1 percent in 2019 – but retreat back to 7.4 percent next year.
Cyprus’ current account balance (as a percentage of GDP) will widen to -8.3 percent this year, but come back down to -5.6 percent in 2021. In 2019 the current account balance stood at -6.7 percent.
In its report, The Great Lockdown, the IMF said the global economy “is projected to contract sharply by -3 percent in 2020, much worse than during the 2008-09 financial crisis.
“In a baseline scenario, which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound, the global economy is projected to grow by 5.8 percent in 2021 as economic activity normalizes, helped by policy support.”
For the Euro Area, the IMF estimates a GDP contraction of 7.5 percent this year, with a recovery of 4.7 percent in 2021.
“This crisis is like no other,” the IMF noted.
“First, the shock is large. The output loss associated with this health emergency and related containment measures likely dwarfs the losses that triggered the global financial crisis.”
The report added: “This crisis will need to be dealt with in two phases: a phase of containment and stabilisation followed by the recovery phase. In both phases public health and economic policies have crucial roles to play.
“Quarantines, lockdowns, and social distancing are all critical for slowing transmission, giving the health care system time to handle the surge in demand for its services and buying time for researchers to try to develop therapies and a vaccine. These measures can help avoid an even more severe and protracted slump in activity and set the stage for economic recovery.”