Cyprus's economy is expected to contract 8.7 percent this year following the EU-IMF bailout designed to put the country back on a stable financial footing, documents seen by Reuters show.

The analysis from the EU and IMF shows that the economy will go on contracting through 2014, returning to marginal growth of 1.1 percent in 2015. At the same time, debt as a proportion of GDP will peak at 126 percent, before falling to 104 percent in 2020, the debt sustainability report shows.

The analysis, which underpins a 10 billion euro bailout from the euro zone and the International Monetary Fund, forecasts the budget deficit to be 6.0 percent of GDP this year, 7.9 percent next year, 5.7 percent in 2015 and 2.5 percent in 2016.