Cen­tral­banker re­vises Cyprus con­trac­tion again, down to 4.0%

Financial Mirror (Cyprus) - - FRONT PAGE -

The Cen­tral Bank of Cyprus has once again re­vised down its projections for the econ­omy’s con­trac­tion this year to 4.0%, slightly milder from the 4.2% es­ti­mated by the Troika of in­ter­na­tional lenders ear­lier this month, it­self down from ini­tial in­di­ca­tions of a -4.8% growth.

This con­firms projections by Sapi­enta Eco­nom­ics ear­lier in June that the Cyprus econ­omy, one year af­ter its painful 10 bln euro bailout fea­tur­ing a hair­cut on unin­sured de­posits and strin­gent cap­i­tal re­stric­tions, will shrink by a less-than-ex­pected 3.1% in 2014.

Cen­tral Bank Gover­nor Chrys­talla Ge­orghadji cited data show­ing an an­nual de­cline in first quar­ter out­put of 4.1% com­pared to 5% for the quar­ter be­fore.

“Based on that as­sess­ment, the troika’s pro­jec­tion for a 4.2 per cent de­cline in growth for the full year is rather pes­simistic,” Reuters quoted her as say­ing. “We would ex­pect it to be around 4.0%.”

With the eco­nomic prov­ing more

re­silient than ex­pected and af­ter the govern­ment re­turned to the in­ter­na­tional mar­kets af­ter a three year ab­sence with a EUR 750 mln five-year bond yield­ing 4.75%, Ge­orghadji said commercial banks were wise to try to raise cap­i­tal ahead of eu­ro­zone-wide stress tests later this year for which they should be “ab­so­lutely pre­pared”.

“A cap­i­tal is­sue would be a pru­dent move for them to move to­wards the stress tests re­in­forced,” she told jour­nal­ists, adding that bet­ter buf­fers against fu­ture losses for commercial banks could also help has­ten the re­moval of cap­i­tal con­trols.

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