The Cypriot economy will shrink by 6.5% of GDP in 2020, amid the coronavirus pandemic followed by a sharp but not equal recovery in 2021, the International Monetary Fund (IMF) said in its April 2020 World Economic Outlook issued today.
According to the IMF, following a growth rate of 3.2% in 2019, the Cypriot GDP will shrink by 6.5% in 2020, compared with its projection of 2.9% in the October 2019 WEO.
In 2021 the Cypriot economy is projected to bounce back registering a growth rate of 5.6%.
According to IMF estimates, Cyprus inflation will amount to 0.7% in 2020 follower by 1.0% the following year.
Unemployment from 7.1% in 2019 will rise to 8.8% this year and is projected to decline to 7.4% in 2021.
Cyprus’ current account deficit is projected to reach 8.3% this year from -6.7% in 2019 and will decline to -5.6% in 2021.
Amid the coronavirus pandemic, the IMF downgraded its projections for the world output, which is forecasted to shrink by 3.0% this year followed by a sharp recovery in 2020 amounting to 5.8%.
The Euro area economy is projected to shrink by 7.5% followed by a recovery amounting to 4.7% in 2021, while the US economy is forecasted to shrink with a rate of 5.9% to be followed by a growth rate amounting to 4.7% next year.
“This crisis is like no other. First, the shock is large,” IMF says, adding “the output loss associated with this health emergency and related containment measures likely dwarfs the losses that triggered the global financial crisis.”
According to the IMF, this crisis will need to be dealt with in two phases: a phase of containment and stabilization followed by the recovery phase, while “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,” the IMF notes.