Econ­omy to con­tract 4%, says FinMin

Financial Mirror (Cyprus) - - FRONT PAGE -

Con­trac­tion in the econ­omy will be at 4% of GDP this year, ac­cord­ing to the Fi­nance Min­istry macroe­co­nomic in­di­ca­tors for May.

This is an im­prove­ment over the 4.2% re­vised pre­dic­tion by the Troika of in­ter­na­tional lenders af­ter their fourth re­view of the Cyprus bailout ad­just­ment pro­gramme, while Pres­i­dent Ni­cos Anas­tasi­ades de­clared on Mon­day that Cyprus will be back on a growth path in 2015.

For 2015, the min­istry es­ti­mates the econ­omy will re­turn to growth with a mar­ginal rate of 0.5%, a hair­line above the 0.4% pre­dicted by the Troika, while for 2016 the pre­dic­tion for growth is slightly lower at 1.5% of GDP, com­pared to the Troika’s more op­ti­mistic 1.6%.

Ac­cord­ing to the min­istry re­port, the ac­cu­mu­lated con­trac­tion for 2013 and 2014 is es­ti­mated at 9.6% of GDP.

The de­lay in the sta­bil­i­sa­tion of the bank­ing sec­tor, with a neg­a­tive im­pact this has on lend­ing and in­ter­est rates, as well as the neg­a­tive de­vel­op­ments in the re­gion and the on­go­ing con­flict in Ukraine re­sult­ing in the de­off­sho­ri­sa­tion of Rus­sian com­pa­nies, are seen as the main chal­lenges fac­ing econ­omy, the min­istry said.

On a pos­i­tive note, the min­istry said that the fis­cal tar­gets will be ex­ceeded in 2014, de­spite the dif­fi­cul­ties faced by the weak rate of growth and the dif­fi­culty to adapt to the tar­gets of Troika me­moran­dum.

As re­gards de­fla­tion, the min­istry said that the present trend in prices is be­ing af­fected by the labour mar­ket, wages, fuel prices, food and taxation.

Ac­cord­ing to the Sta­tis­tics Ser­vice Cy­s­tat, de­fla­tion in June was con­tained at 0%,


Cyprus com­pared to -0.1% in May, while the Troika be­lieves the cur­rent year will close with an in­fla­tion tar­get of 0.2%.

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