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Economy

COVID-19 Effect Crushing Cyprus Economy, Jitters Remain

While the COVID-19 Coronavirus by May 10 had taken 16 lives on Cyprus, the aftermath effect on an economy shut down for weeks to prevent its spread will be devastating this year.

University of Cyprus (UCY) economists expect the island's economy will shrink by 6.9 percent of the Gross Domestic Product (GDP) but could be as much as 13.1 percent as it's still unknown whether there will be any kind of a summer tourism season.

Those were the findings from UCY Economics Research Centre that showed how deep the losses will be after the economy grew by 3.2 percent in 2019, continuing a comeback from a 2013 crisis brought by bad bank management.

“The outbreak of the pandemic in   Cyprus and the containment measures that followed could be viewed as an exogenous shock to the economy that has primarily affected supply; the shock, however, could gradually impact demand,” noted the report, according to The Financial Mirror.

The report found there will be a big impact on a range of front, including manufacturing where businesses will be required to keep social distancing and hygiene protocols once they resume operation.

The baseline scenario assumes an adjustment period of two months and a reduction in external demand for tourist services in Cyprus from April to August, with an expected drop of at least 40 percent in annual tourist arrivals, but it could reach 80 percent.

Retail trade, transportation, accommodation and food service activities and the sector of arts, entertainment, recreation and other service activities are associated with the largest output losses, amounting to around 20% of their gross value added.

Significant output losses are also estimated for construction, manufacturing, as well as administrative and support service activities.

“The response of economic activity  to  the COVID-19  crisis does  not  only  depend on mitigating     economic policies and the economic fundamentals of the country but also on the epidemiological outcomes in Cyprus and abroad in the following months,” the report said, the government keeping an eye out for any resurgence of the virus this year.

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