19.04.2022
Economic growth in Cyprus will slow to 2.1% in 2022, and inflation will jump to 5.3% due to the impact of the Russian invasion of Ukraine and Western sanctions against Russia, according to the IMF’s World Economic Outlook.
Following the January WEO, the IMF said that the global outlook “has worsened, largely due to Russia’s invasion of Ukraine, which triggered a tragic humanitarian crisis in Eastern Europe, and sanctions aimed at forcing Russia to cease hostilities.”
It says a new crisis is unfolding as the global economy is on a recovery path but has not yet fully recovered from the COVID-19 pandemic.
There has been a significant divergence between the economic recovery in advanced economies, emerging markets and developing countries, while frequent and wide-ranging lockdowns in China, including in key manufacturing centers, have also slowed activity there and could create new bottlenecks in global supply chains.
“The economic effects of war are spreading everywhere – like seismic waves emanating from the epicenter of an earthquake – mainly through commodity markets, trade and financial ties,” the Foundation said in a statement.
It notes that Russia is a major supplier of oil, gas and metals, and together with Ukraine of wheat and corn, the current and expected decline in the supply of these goods has already led to a sharp increase in their prices.Regarding the global economy, the IMF said that, in addition to the immediate humanitarian consequences, the war would seriously slow down the global economic recovery, slow growth and further increase inflation.
The April WEO projects global growth of 3.6% in 2022 and 2023, 0.8 and 0.2 percentage points below the January forecast.
“The downgrade largely reflects the direct impact of the war on Russia and Ukraine and the global side effects.”
As for Cyprus, the IMF said that real GDP growth will be 2.1% in 2022 from 5.5% last year and accelerate to 3.5% in 2023.
The outlook for 2022 is in line with the estimate announced in the IMF statement issued following the completion of Article IV consultations with Cyprus the previous month.
However, inflation is estimated to rise to 5.3% in 2022 and fall to 2.3% next year.
Unemployment in Cyprus will rise from 7.5% to 8.5% in 2022 and fall to 7.5% next year.
The IMF said that Cyprus’ current account deficit will reach -9.4% of GDP this year and fall to -8.3% in 2023.
