Cyprus is expected to return to growth in 2015 and this year’s slowdown should be shallower than expected, its central bank governor said on Monday.
Chrystalla Georghadji told parliament she expected 0.5 per cent growth in 2015. A European Commission forecast a 2.8 per cent contraction in the island’s economy this year was “realistic”, she said.
Authorities had previously forecast a 2014 contraction of 3.2 per cent. Cyprus slipped into recession in 2011. Data in November put the annualised fall in output at -2.2 per cent in the third quarter, from -2 per cent in the second quarter.
“I’m optimistic 2015 will be a year where Cyprus will return to growth, the signs of recovery are faster,” Georghadji, who also represents Cyprus on the Governing Council of the European Central Bank, told parliament’s financial affairs committee.
She did not make any reference to the Eurozone economy.
Cyprus needed an international bailout of €10 billion from the European Commission and the International Monetary Fund in early 2013.
The aid was contingent on Cyprus shutting down a loss-making bank, Laiki, and forcing depositors in Bank of Cyprus/sto forfeit savings over €100,000 to recapitalise the lender.
It was the first time in the history of the Eurozone crisis that bank depositors, rather than the Eurozone taxpayer, were forced to shoulder the cost of recapitalising a bank.
Both Cypriot banks booked billions in losses from an EU-sanctioned haircut on Greek sovereign bonds designed to make that country’s debt mountain more manageable.