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IMF anticipates zero growth
04-27-09
| In its latest World Economic Outlook, the International Monetary Fund believes that the Cypriot economy will grow slowly in 2009, before starting to recover gradually in 2010. Until recently, the Finance Ministry anticipated that growth rate would stand between 1-2%, while the European Commission expected that it would fall to 1.1%. The IMF technocrats are more pessimistic and foresee that economy will grow by 0.3% in 2009, before recovering in 2010 (2.1%). If the IMF forecasts become true, this will be the lowest GDP growth since 1980. 1991 and 1993, the most difficult years in the past decades, growth rate stood at 0.7%.  The IMF also believes that inflation will decline to 0.9% in 2009 before increasing to 2.4% in 2010. Unemployment will reach 4.6% in 2009 and will drop to 4.3% in 2010. The IMF forecasts boost estimates that economy will possibly shrink in the first months of 2009 since none of its main sectors, except for the banks, grows. The forecasts will also spark deliberations for the course of the island's economy and the Finance Ministry's forecasts, which have been revised four times since October. The state budget was based on admittance for a GDP growth of 3.7%. However, it is encouraging that the other euro area peers face more unfavourable economic environment. According to the IMF report, Cyprus is the only euro area country whose economy will grow (even slightly) in 2009. The remaining countries will suffer shrinkage. Moreover, Cyprus is expected to have the highest growth rate in 2010. Overall, the euro area will shrink by 4.2% in 2009 and 0.4% in 2010. Things in countries such as Germany are exceptionally negative, since economy is expected to shrink by 5.6% in 2009. It is worth noting that the Irish economy will shrink by 8%. The IMF forecasts for Greece are exceptionally interesting: It is the only euro area country that economy will shrink by 0.6% in 2010 against 0.4% in 2009. According to IMF, the global economy will shrink by 1.3% in 2009, the highest since the end of World War II. The three fourths of the planet are expected to have negative growth rate. Growth will recover in 2010, but at 1.9%. The write offs due to the bad debts are expected to reach $4 trillion in the next few years, while two thirds of those bad debts will be absorbed by the banks. Finally, the IMF urged the countries to keep taking fiscal measures for the strengthening of their economies. |
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