Cyprus’s economy to grow 2.2% in 2017 after growing 2.8% this year

The International Monetary Fund (IMF) said that Cyprus’s economy which exited a prolonged recession last year when it grew 1.5 per cent will see its growth rate slow down from 2.8 per cent this year to 2.2 per cent in 2017.

The pick-up of economic activity this year is projected to help reduce the average unemployment rate to 13 per cent from 14.9 per cent last year before it drops to 11.6 per cent in 2017, the IMF said in its World Economic Outlook report on Tuesday on its website.

In 2017, consumer prices are expected to rise again after falling 1.5 per cent in 2015 and a projected 1 per cent this year, it said. Cyprus’s current account balance is expected to generate a deficit of 0.9 per cent of economic output this year compared to 3.6 per cent last year, which is marginally lower compared to the 2017 forecast. The economy of the euro area which expanded 2 per cent last year and is projected to grow 1.7 per cent in 2016, is expected to slow down further next year for which a 1.5 per cent growth rate is forecast.

Consumer prices in the euro area which remained unchanged in 2015 –forcing the European Central Bank to take unprecedented action including reducing interest rates well into the negative area and an expanded asset purchase programme in order to avert deflation– are projected to increase 0.3 per cent in 2016 before rising 1.1 per cent next year. The unemployment rate in the euro area is expected to drop to 9.7 per cent next year from 10 per cent in 2016.

The economy of the UK, Cyprus’s largest source of incoming tourism is expected to expand 1.1 per cent next year, when the country is expected to trigger article 50 of the European Treaty in order to exit the European Union, the IMF said. The British economy is projected to grow this year 1.8 per cent compared to 2.2 per cent last year.

The economy of Russia, Cyprus’s second largest tourist market, is expected to grow next year 1.1 per cent after contracting a projected 0.8 per cent in 2016 and 3.7 per cent last year.

The U.S. economy, the world’s largest is projected to grow 1.6 per cent this year before growth picks up at 2.2 per cent next year, the IMF said. While China, which saw its growth rate slow down to a projected 6.6 per cent in 2016 from 6.9 per cent last year, will see its economy expand 6.2 per cent next year.