International Monetary Fund Changes Outlook for Cyprus Economy

Международный валютный фонд изменил прогноз для кипрской экономики
15 October 2021 DOM LiVE

The International Monetary Fund (IMF) has revised its forecast for Cyprus. Now they think that the island's economy will recover faster.

The IMF's World Economic Outlook noted that Cyprus's economy will grow 4.8% in 2021 after a 5.1% recession in 2020. In 2022, the IMF predicts a slowdown in growth to 3.6% (in April this year they projected 3.9%).

As for the unemployment rate, the IMF has not changed their opinion. It is expected to decline to 7.5% in 2021 from 7.6% in 2020 and to 6.9% in 2022.

As for inflation in the country, the IMF's opinion has changed. According to the report, in 2021 it will be 1.7% (1.1% in 2020, and in 2022 - to 1%). By the way, in its April report, the IMF expected inflation at 0.5% this year and 0.8% in 2022.

The current account deficit of the paying country, which reached 11.9% of GDP in 2020, will be 9.3% in 2021 and 7.4% in 2022. In the April report, the forecast was set at a lower level: 8.5% and 6.1%, respectively.

It should be noted that the current IMF estimate is more optimistic than the indicators set by the Cypriot Ministry of Finance for 2022. Thus, the Ministry of Finance expects that this year the growth will be 5.5%, and next year it will slow down to 4%.

Международный валютный фонд изменил прогноз для кипрской экономики

 Ранее представители ФРС заявили, что основным оружием в борьбе с инфляцией является повышение процентных ставок. 

In addition, the IMF lowered its forecast for global gross domestic product (GDP) growth in 2021 by 0.1%, to 5.9%. The forecast for US GDP growth was reduced by 1%, to 6% - at the same time, it is higher than the global forecast of 5.2% for developed countries. For the next year, the IMF maintained its forecast for global growth at 4.9%.

Although the IMF agreed with the estimates of the Federal Reserve System (FRS) and many economists that the current global wave of price increases will eventually weaken, it nevertheless noted that there is "high uncertainty" about these forecasts. The IMF report cites the United States, as well as the United Kingdom and other developed countries, as places where "inflation risks are biased upward."

While monetary policy can typically accommodate temporary increases in inflation, central banks must be prepared to act quickly if the risks of rising inflationary expectations become more significant in this unexplored recovery. Central banks need to plan what they can do, declare clear triggers and act on that message, ”said Gita Gopinath, IMF economic adviser and director of research.

Earlier, representatives of the FRS said that the main weapon in the fight against inflation is raising interest rates.

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