The contraction is higher than what is expected by the government, which set the figure for 2012 at -0.5 per cent.
The government’s projected growth rate for 2013 is 0.5 per cent.
The IMF expects unemployment in Cyprus to reach 9.5 per cent this year and record a slight increase in 2013 – 9.6 per cent.
Inflation, according to the IMF, will fall to 2.8 per cent in 2012 from 3.5 per cent in 2011.
For 2013 inflation is expected to be 2.2 per cent, the IMF said in its World Economic Outlook.
Global growth is slowly improving as the U.S. recovery gains traction and dangers from Europe recede, but risks remain high and the situation is very fragile, the IMF said.
Another flare-up of the eurozone sovereign debt crisis or sharp escalation in oil prices on geopolitical uncertainty could disrupt a world economy finding its feet once again after market turmoil over euro-zone budget deficits, the fund said.
“An uneasy calm remains. One has the feeling that at any moment things could well get very bad again,” IMF chief economist Olivier Blanchard told reporters as he detailed the Economic Outlook.
“Our baseline forecast is for low growth in advanced countries, especially in Europe, but with downside risks being extremely present,” he said.
The IMF revised upward its global growth forecast for this year to 3.5 per cent from 3.3 pe rcent in January, and to 4.1 per cent for 2013 from 3.9 per cent previously.
While the eurozone will suffer a mild recession, the IMF said it will be less severe than feared after policy actions calmed markets at the turn of the year.
Published on April 18, 2012