19/04/2022 16:20
Economic growth in Cyprus will slow down to 2.1% in 2022 with inflation spiking to 5.3% this year due to the impact of the Russian invasion of Ukraine and western sanctions against Russia which lead to further inflationist pressures, the IMF said in its April World Economic Outlook (WEO) issued today.
The IMF said that since the January WEO, the global outlook “has deteriorated, largely because of Russia’s invasion of Ukraine—causing a tragic humanitarian crisis in Eastern Europe—and the sanc tions aimed at pressuring Russia to end hostilities.”
It added that the new crisis unfolds while the global economy was on a mending path but had not yet fully recovered from the COVID-19 pandemic, with a significant divergence between the economic recoveries of advanced economies and emerging market and developing ones, while frequent and wider-ranging lockdowns in China—including in key manufacturing hubs—have also slowed activity there and could cause new bottlenecks in global supply chains.
“The economic effects of the war are spreading far and wide—like seismic waves that emanate from the epicenter of an earthquake—mainly through commodity markets, trade, and financial linkages,” the Fund said, noting that because Russia is a major supplier of oil, gas, and metals, and, together with Ukraine, of wheat and corn, the current and anticipated decline in the supply of these commodities has already driven their prices up sharply.
On the global economy, the IMF said that beyond the immediate humanitarian impacts, the war will severely set back the global recovery, slowing growth and increasing inflation even further.
The April WEO projects global growth at 3.6 percent in 2022 and 2023—0.8 and 0.2 percentage points lower than in the January forecast, respectively. “The downgrade largely reflects the war’s direct impacts on Russia and Ukraine and global spillovers,” IMF said.
Concerning Cyprus, the IMF said real GDP growth will amount to 2.1% in 2022 and will accelerate to 3.5% the following year. The 2022 projection is in line with the estimate announced during the IMF statement issued following the conclusion of the article IV consultation with Cyprus the previous month.
However, inflation is estimated to spike to 5.3% in 2022 and will decline to 2.3% the following year.
Unemployment in Cyprus from 7.5% in 2021 is projected to rise to 8.5% in 2022 and decline back to 7.5% the next year, the IMF said, noting that Cyprus current account deficit will reach 9.4% in 2022 and decline to 8.3% in 2022.