IMF revises upwards its forecasts for growth of the Cypriot economy

The International Monetary Fund revised upwards the growth rate of the Cypriot economy, compared to its forecasts for last April.

According to the World Economic Outlook (WEO) published on Tuesday, the growth rate of the Cypriot economy for 2021 will be 4.8 per cent compared to a recession of 5.1 per cent recorded in 2020. The growth rate was projected at 3 per cent in last April`s WEO. Growth for 2022 is projected at 3.6 per cent, compared to 3.9 per cent projected in April.

According to the IMF, unemployment is projected to fall from 7.6 per cent in 2020 to 7.5 per cent in 2021, to be further reduced to 6.9 per cent in 2022, a forecast that remains unchanged since April.

The inflation forecast is also revised upwards, as the IMF estimates that in 2021 it will rise to 1.7 per cent from -1.1 per cent in the previous year and will be 1 per cent in 2022. In its spring forecast, the IMF predicted that inflation would reach 0.5 per cent in 2021 and 0.8 per cent in 2022.

The current account deficit is also projected to increase and according to the IMF will reach 9.3 per cent from 11.9 per cent of GDP in 2020 and will fall to 7.4 in 2022. According to the projections of last April, the current account deficit was estimated at 8.5 per cent of GDP in 2021 to decline to 6.1 per cent in 2022.

Based on the forecasts of Cyprus’ Ministry of Finance included in 2022 budget, the growth rate is expected to reach 4 per cent in 2022 compared to an estimated growth of 5.5 per cent in 2021.

World economy

Concerning the global growth, IMF projection for 2021 has been revised down marginally to 5.9 per cent from 6 per cent and is unchanged for 2022 at 4.9 per cent.

As mentioned, the global recovery continues but the momentum has weakened, hobbled by the pandemic. Fuelled by the highly transmissible Delta variant, health risks abound, holding back a full return to normalcy.

IMF also notes that pandemic outbreaks in critical links of global supply chains have resulted in longer-than-expected supply disruptions, further feeding inflation in many countries. Overall, risks to economic prospects have increased, and policy trade-offs have become more complex.

It also highlights as the foremost policy priority to vaccinate adequate numbers in every country and prevent more virulent virus mutations.