On April 16, 2024, the International Monetary Fund (IMF) published the World Economic Outlook (WEO April) report entitled “Steady but Slow: Resilience amid Divergence”.
In this report, he broadly states that economic activity has been surprisingly resilient to global deflationary conditions in 2022-2023, despite significant rate hikes by Central Banks to restore price stability. It also states that risks to the global outlook are now broadly balanced compared to last year.
In the April 2024 report, the new IMF estimates for the Cypriot economy are also presented. Based on these estimates:
the growth rate for 2024 is estimated at 2.7% and for 2025 at 2.9%. The forecast for 2024 remains the same as the IMF’s previous one (WEO October 2023), while the forecast for 2025 has been marginally reduced by 0.1 pp.
unemployment is projected for 2024 and 2025 to decrease to 5.9% and 5.7%, respectively, and is lower by 0.5 p.p.m. approximately from previous IMF forecasts
the forecast for inflation is at 2.3% and 2.0% in the years 2024-2025, respectively, which increases are lower by 0.1-0.2 pp. respectively from the previous forecasts of the IMF.
The Ministry of Finance welcomes the new IMF estimates. These estimates are better than the previous ones and quite close to those of the Ministry of Finance and recognize the resilience and prospects of the Cypriot economy as stated by the head of the IMF team after the completion of the consultations in March 2024 in the context of the assessment of the Cypriot economy pursuant to Article IV of the IMF.
As mentioned in the Escalation Declaration, supported by appropriate policies, the Cypriot economy has recovered quickly from the effects of the pandemic and has proven to be broadly resilient to multiple adverse shocks. Growth is faster than most European countries and inflation is approaching the 2% target. Fiscal performance continues to be strong, significantly reducing public debt.
The Ministry of Finance notes that the positive developments in the economy, despite the challenges and uncertainty, show the resilience of the Cypriot economy to external shocks, based on healthy financial indicators and the good performance of the economy, especially in the tourism and other services sectors. However, uncertainty surrounding the macroeconomic outlook remains high due to the challenging external environment from the ongoing Russia-Ukraine war and the war conflict in Israel and the Gaza Strip that is still raging and risks escalating into a wider conflict in the Middle East. As at this stage it is impossible to predict the duration of the conflict and its eventual escalation, it is not possible to quantify any risks to the Cypriot economy.
