World Economy

Cyprus to Exit Recession in 2015

Cyprus to Exit Recession in 2015Cyprus to Exit Recession in 2015

Cyprus’s shell-shocked economy will exit recession in 2015 as the island’s recovery from the near collapse of its banks gathers pace, the central bank chief said on Monday.

“My optimism for this is based on the fact that so far we have experienced progress towards exiting the crisis at a faster pace with more positive results than initially forecast,” AFP quoted Chrystalla Georghadji as telling a parliamentary committee.

She said she expected the island’s eurozone economy to experience moderate growth of 0.5 percent next year, and a shallower than feared recession for 2014.

She said a European Commission forecast of a 2.8 percent contraction for this year “seems realistic”.

The finance ministry estimates the economy will contract by 3 percent this year and grow by 0.4 percent of GDP in 2015.

The economy slowed by 2 percent in the third quarter, compared to 2.2 percent in the second, official figures indicated last month. Cyprus has been in recession since 2011.

The troika of international lenders – the European Commission, the European Central Bank and the International Monetary Fund – bailed out Cyprus in March 2013 to prevent a banking collapse.

In return for the bailout, Cyprus agreed to a severe austerity program and a profound restructuring of its bloated financial sector.

The deal included a restructuring of the banks, with the island’s second-largest lender, Laiki, wound up and its good assets folded into the largest lender, Bank of Cyprus (BoC).

Fears of a bank run in March 2013 forced the government to close all the island’s banks for nearly two weeks and impose draconian controls when they reopened.

Domestic capital controls have since been lifted but external ones remain in place.

Georghadji said external capital controls would be lifted as soon as the banking sector stabilized.