IMF Staff Country Reports

Cyprus : 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Cyprus

Author/Editor:

International Monetary Fund. European Dept.

Publication Date:

December 14, 2017

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

Cyprus has achieved an impressive turnaround since its banking crisis. Output growth has been accelerating for three consecutive years and is now strong, while unemployment is on a rapidly-declining path. The fiscal primary balance has swung from a large deficit to a moderate surplus. Emergency liquidity assistance to banks has been fully repaid and their deposit bases are growing. House prices have corrected. Yet private sector debt and nonperforming loans (NPLs)—key legacies of the previous boom-bust cycle—remain extremely large. Also, the pace of NPL reduction has been slow despite several years of robust GDP growth. Public debt is also elevated. Dynamic growth is set to persist for the next few years, underpinned by ongoing large construction projects and (albeit undesirable) continued weak payment discipline alongside slow progress with NPLs. Elevated financial sector vulnerabilities and the potential for a new construction boom, supported by possibly-volatile capital flows, pose risks to this outlook.

Series:

Country Report No. 17/375

Subject:

Article IV consultation reports Balance of payments statistics Cyprus Debt reduction Debt sustainability analysis Economic growth Economic indicators Economic recovery Fiscal policy Fiscal sustainability Press releases Private sector Staff reports