Its loss absorption capacity, as measured by the CET1 ratio, amounts to 17,6 per cent as at December 2021, which is also above the EU average of 15,7 per cent. But more importantly, the first round effects of the war to the Cyprus banking system do not appear to pose any material threat to the banking sector since the direct links of Cyprus' banking sector with Russia and Ukraine are limited and not material. As at December 2021, the total assets that is loans and deposits from the two countries amounted to just 0,8 per cent of total loans and 4,7 per cent of total deposits respectively. The only bank whose business model was affected by the war and the sanctions on Russia was RCB Bank. The Central Bank of Cyprus acted proactively and timely. Our objective was to safeguard depositors and financial stability of the country. Through our actions and the cooperation of RCB Bank itself, a transaction structure was successfully implemented that safeguarded all depositors without any impact on the public finances or any negative spill over effects to the rest of the banking sector, thereby preserving financial stability. It is our opinion, which is also shared by the ECB, that the decisions and actions taken were the best possible under the prevailing circumstances. The Cyprus banking sector is providing credit to viable businesses and households.
Overall, the war in Ukraine has a strong effect on economic sentiment and increased considerably the risks to the economic growth outlook which are now skewed to the downside. According to the April IMF forecasts, euro area GDP growth in 2022 is revised down to 2,8 per cent, from the previous projection for growth of 3,9%. A 1.1 percentage points reduction in expected GDP growth. However, there are still factors supporting economic activity and recovery, such as the reopening of the economies after the crisis phase of the pandemic, strong labour market underpinning incomes, and households' accumulated savings from the pandemic period which support consumption. The labour market in particular, has sustained its recovery momentum, with unemployment falling to a historical low of 6,8 per cent in February 2022. Job postings across many sectors still reflect strong labour demand. Whereas the war caused GDP growth to be revised downwards, a parallel impact is that it has also intensified the upside risks surrounding the inflation outlook, especially in the near term. Based on the same IMF forecasts, euro area inflation in 2022 is expected to reach 5,3 per cent, compared to 1,7 per cent projected by the IMF back in October 2021. Core euro area inflation, as measured by HICP excluding energy and  1/5  BIS - Central bankers' speeches  food rose from 2,7 per cent in February to 3 per cent in March 2022 with an increase in the sectoral inflation rates for both non energy industrial goods and services.