CYPRUS ECONOMY TO SHRINK 20% BEFORE RECOVERING IN 2017

Cyprus bailed out economy is not expected to see any recovery until 2017 when GDP will have contracted by a cumulative 20 percent. After falling by an estimated 7.4 percent in 2013, Cyprus GDP is forecast to shrink by a further 8 percent in 2014 and 2.7 percent in 2015, against a backdrop of shattered consumer and investor confidence, soaring unemployment and a credit crunch according to EY.

The troika of international lenders: the European Central Bank, the European Commission and the International Monetary Fund  project contractions of 7.7 percent in 2013 and 4.8 percent in 2014. But they see a return to growth in 2015, and forecast GDP rising by 1.1 percent that year and 1.9 percent in 2016.

Household incomes are coming under enormous pressure from the impact of fiscal consolidation efforts, while the repercussions of the crisis in the private sector are likely to result in a sharp increase in unemployment to around 25 percent of the workforce by 2015. As a result, consumer spending will continue to decline throughout 2013. With deposits continuing to decline and non-performing loans at very high levels, it will be some time before conditions in the financial sector stabilise and the remaining capital controls can be lifted.

There is a glimmer of hope offered by the island's untapped offshore gas reserves. Preliminary reports place the gross value of these reserves at $50 billion, approximately three times Cyprus GDP.