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Eurozone crisis

IMF predicts Cyprus to return to growth in 2015

The International Monetary Fund said eurozone member Cyprus has a realistic chance of posting some growth again in two years. But it warned that the country's current austerity program had to be followed through.

In a staff report issued on Friday, the International Monetary Fund (IMF) said it expected the Cypriot economy to expand by a modest 1.1 percent in 2015 after plunging 8.7 percent this year and a further 3.9 percent in 2014.

It also forecast that unemployment in the country would reach 15.5 percent this year and peak at 16.9 percent next year.

The IMF report praised the government in Nicosia for its "exceptional resolve in addressing the financial crisis." It said a potential accident was averted with unknown consequences for the eurozone as a whole.

Banking crisis aftermath

The IMF agreed in March to provide Cyprus with one billion euros ($1.3 billion) in aid, along with another nine billion euros from the European Union to ward off a meltdown of the domestic economy.

The bailout deal was tied to Nicosia agreeing to drastic savings and restructuring measures, including the shrinking of a bloating banking sector, tax increases and the privatization of some state companies.

The IMF warned that the macroeconomic risks facing Cyprus remained exceptionally high, given the uncertain impact of the banking crisis. "Financial sector risks are particularly acute, including concerns about the high reliance of the Bank of Cyprus on central bank support," the report stated.

hg/jm (AFP, AP)