'High risk' of deeper Cyprus recession: central bank

(NICOSIA) - Cyprus's central bank governor said on Wednesday the country's teetering economy could fall deeper into recession than previously thought.

"Risks to the outlook are substantial and tilted to the downside," Panicos Demetriades said in a prepared speech to certified public accountants.

"Macro-economic risks remain unusually high, given the uncertain impact of the banking crisis and fiscal consolidation on economic activity," he added.

Demetriades did not forecast what the decline would be, but Finance Minister Haris Georgiades said on Tuesday the it could be in the double digits.

The International Monetary Fund, which has joined with the European Commission and European Central Bank to provide near-bankrupt Cyprus with a 10 billion-euro bailout ($13 billion), forecast last week that gross domestic product would decline 8.7 percent this year and 3.9 percent in 2014.

But it also warned the decline could be worse than that.

Demetriades also said capital controls imposed as part of the bailout package will have to be eased gradually, as eliminating them abruptly could trigger rapid outflows from the banking sector and liquidity problems.