Cyprus’s economy probably shrank 5.5 percent last year, less than previously forecast, thanks to resilience in private consumption and the contribution from tourism, the finance ministry said.
Cyprus, which received 10 billion euros in aid from the European Commission and the IMF to avert a default, had previously estimated a 7.7 percent fall in gross domestic product for 2013. That had also been revised from earlier expectations of a 8.7 percent contraction, defined in its EU/IMF economic adjustment program.
A Finance Ministry document, dated Jan. 22, did not offer specific forward guidance on recession projections for 2014, but said the economy still faced challenges amid a weak growth outlook.
In December, the IMF trimmed its forecast for the island’s economic contraction to 7.7 percent from 8.7 percent, but it stuck by its initial forecast for a cumulative economic downturn of 13 percent for the 2013-2014 period.
The IMF also warned that Cyprus’s efforts to extricate itself from debt would weigh on output for the next decade.
Cyprus closed a major bank and confiscated deposits in a second bank to recapitalize it under terms of its international bailout. Controls to prevent a flight of capital are still in place – a first for a euro zone member nation. [Reuters]