REVIEW OF THE ECONOMY 2013
8
SUSTAINING GROWTH, SECURING PROSPERITY
levels for both Spain and Greece will increase to
27.0 percent in 2013 from 25.0 percent and 24.2
percent, respectively, in 2012. Unemployment is
anticipated to fall marginally in Ireland from 14.7
percent in 2012 to 14.2 percent in 2013.
Cyprus accumulated large imbalances prior to
the global financial crisis and developed deep
financial links with Greece. Bank loans to Greek
residents and holdings of Greek Government
bonds reached 130 percent and 30 percent of
GDP respectively, in 2011. As the financial crisis
deepened, imbalances in Cyprus intensified as
a result of these sovereign-bank links. Policies
initiated to mitigate the impact on the economy
included the divestment of the Greek branches
of Cypriot Banks and the restructuring of the
CyprusPopularBankandtheBankofCyprus.The
Government of Cyprus also secured assistance
from the International Monetary Fund and the
European Stability Mechanism of approximately
€1 billion and €9 billion respectively to be made
available over the period 2013 to 2016.
JAPAN
Japan’s GDP is expected to grow by 1.6 percent
in 2013, down from the 2.0 percent experienced
in 2012 in the aftermath of the great East
Japan earthquake and tsunami.Even with
the anticipated economic growth, inflation
in Japan is expected to remain around 0.0
percent, marginally increasing to 0.1 percent
in 2013. Prices have remained non-reactive to
growth in the economy possibly due to lingering
deflationary
expectations
of
consumers.
Unemployment in Japan is expected to fall
slightly from the 2012 figure of 4.4 percent to 4.1
percent in 2013.
The fiscal deficit inJapan is expected to continue
to hover around -9.8 percent in 2013 down
marginally from -10.2 percent of GDP in 2012. A
new stimulus package, estimated at 1.5 percent
of GDP, including investment projects which are
however, on April 24, 2013 the Bank of England
extended the FLS to early 2015.
The current account balance for the UK is
projected to deteriorate from -3.5 percent in
2012 to -4.4 percent of GDP in 2013. The fiscal
balance is expected to improve from -8.3
percent in 2012 to -7.0 percent of GDP in 2013.
THE EURO AREA
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The financial pressures in the Euro Area have
moderated as a result of the policy actions taken
by the European Union. Some of these policy
actions include: Outright Monetary Transactions
(OMTs), the completion of the EuropeanStability
Mechanism, progress on Greek debt relief,
and the agreement on the Single Supervisory
Mechanism.
Despite the easing of financial pressures, growth
in the Euro Area is expected to continue to be
negative, with real GDP projected to contract by
0.3 percent in 2013, up from -0.6 percent in 2012.
Growth will be positive in Germany and Ireland
with real GDP projected to grow to 0.6 percent
and 1.1 percent respectively in 2013.However, real
GDP is expected to contract in Spain, Portugal
and Greece with figures of -1.6 percent, -2.3
percent and -4.2 percent respectively, in 2013.
Inflation in the Euro Area is expected to fall to
1.7 percent in 2013, down from 2.5 percent in
2012. Germany, Spain, Portugal and Ireland is
forecasted to experience reductions in their
inflation rates from 2.1 percent, 2.4 percent 2.8
percent and 1.9 percent in 2012 to 1.6 percent, 1.9
percent, 0.7 percent and 1.3 percent respectively
in 2013. Greece is expected to experience a
deflationary environment with inflation falling
from 1.0 percent in 2012 to -0.8 percent in 2013.
Unemployment in the Euro Area is expected to
increase from11.4percent in2012 to12.3percent
in 2013. It is projected that the unemployment
1
Austria, Belgium, Cyprus, Estonia, Finland, France, Germa-
ny, Greece, Ireland, Italy, Luxemburg, Malta, Netherlands,
Portugal, Slovak Republic, Slovenia, Spain.
THE INTERNATIONAL ECONOMY
