By Stelios Orphanides
The European Commission said that economic growth in Cyprus is set to slow down to 2.5 per cent this year and 2.3 per cent in 2018, after it expanded 2.8 per cent in 2016.
This year, consumer prices are expected to increase 1.2 per cent after dropping as much last year, while the 2017 inflation rate is expected to slow down to 1.1 per cent, the EU commission said in its spring economic forecast, published on Thursday.
The unemployment rate is expected to drop from 13.1 per cent last year, to 11.7 per cent in 2017 and 10.8 per cent in 2018, it said.
The Commission’s forecast is slightly more pessimistic compared to that of the finance ministry, included in its April stability programme. There, the government forecast a 2.9 per cent growth rate for both 2017 and 2018.
The Commission said it expects the government to meet its fiscal target of generating a fiscal surplus of 0.2 per cent of economic output and overshoot its 2018 target by 0.3 percentage points, producing a surplus of 0.7 per cent.
The commission expects the government to reduce the public debt, as a ratio of gross domestic product, to 103.4 per cent next year, compared to the finance ministry’s target of 104 per cent.
In 2018, debt is expected to drop for the first time since the financial crisis below the 100 per cent mark, to 99.8 per cent, according to the Commission’s forecast, which is marginally higher compared to that of the finance ministry.
The current account balance is forecast to expand to 5.9 per cent of economic output this year and 6.3 per cent in 2018, from 5.7 per cent last year, it said.