ERC says re­ces­sion to con­tinue in 2015

Financial Mirror (Cyprus) - - FRONT PAGE -

Re­ces­sion in Cyprus is pro­jected to con­tinue next year as well, the Eco­nom­ics Re­search Cen­tre of the Univer­sity of Cyprus said in its July Eco­nomic Out­look, fore­cast­ing a con­trac­tion in GDP of 0.7% in 2015, un­like a weak growth of 0.4% pro­jected in the ad­just­ment pro­gramme.

For the cur­rent year, the ERC fore­casts a mod­er­ate re­ces­sion com­pared to 2013.

ERC says its pro­jec­tions in­di­cate a milder re­ces­sion for 2014 com­pared to the con­trac­tion of real GDP by 4.2% fore­cast in the eco­nomic ad­just­ment pro­gramme. For 2015, the pro­jec­tions in­di­cate that ac­tiv­ity will con­tinue to de­cline, al­beit at a slower pace than this year.

Ac­cord­ing to the ERC, real GDP growth for 2014 is pro­jected at -2.7%, with the same rate of con­trac­tion recorded in the sec­ond quar­ter, while in the third and fourth quar­ters real ac­tiv­ity is fore­cast to de­cline by 2.3% and 1.6%, re­spec­tively.

The Cen­tre es­ti­mates that re­ces­sion will per­sist in 2015 but the con­trac­tion of real GDP is es­ti­mated to de­cel­er­ate fur­ther at -0.7%. Real out­put is pro­jected to fall by 1.1% in the first quar­ter of 2015 and by 0.8% in the sec­ond and third quar­ter; in the fi­nal quar­ter of 2015 real GDP is fore­cast to re­main flat.

“Although the er­ror per­tain­ing to the pro­jec­tions for 2015 pre­sented here is rel­a­tively large, the ev­i­dence for a more pro­tracted ac­tiv­ity con­trac­tion is con­sis­tent with some of the at­tributes of this re­ces­sion, such as high pri­vate and pub­lic sec­tor in­debt­ed­ness lev­els, ad­verse credit con­di­tions and delever­ag­ing, weigh­ing fur­ther on do­mes­tic de­mand, most no­tably in­vest­ment,” the ERC said.

“The de­cline in out­put for 2014 is es­ti­mated to be less se­vere than in pre­vi­ous quar­ters, as the re­ces­sion in Cyprus eased fur­ther dur­ing the first quar­ter of the year and eco­nomic con­di­tions in the EU con­tin­ued to im­prove,” it noted.

“Do­mes­tic lead­ing in­di­ca­tors as­so­ci­ated with real ac­tiv­ity and the labour mar­ket have also been pick­ing up, adding to the less neg­a­tive eco­nomic out­look.” it added.

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