Cyprus: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Cyprus

IMF Staff Country Reports, December 9, 2019

Source details

Canonical URL: Cyprus: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Cyprus

Following a period of very rapid growth in the aftermath of the economic crisis, growth is gradually settling in at a more sustainable but still relatively robust pace despite the external slowdown.
Output is projected to rise by around 3 percent in 2019–20, supported by construction and services sectors.

Good progress has been made in addressing domestic and external stability risks arising from legacies of the financial crisis.
Policies and actions that strengthened bank balance sheets:
- Sales of nonperforming loans (NPLs).
- Amendments to the foreclosure and insolvency framework.
- Resolution of a large systemic bank.
Risks related to reversing reforms:
- Reversal of reforms to the foreclosure framework would hinder ongoing NPL resolution efforts and create risks for financial stability.
Contingent liability and fiscal risk scenario:
- Realization of contingent liabilities from the still weak banking sector or increased fiscal spending pressures could undermine investor confidence, raising interest costs and depressing growth.

Cyprus needs to build on recent gains by advancing reforms to:
- Secure macroeconomic stability.
- Enhance efficiency.
- Strengthen productivity and growth potential.