## Cyprus: 2023 Article IV Consultation-Press Release; and Staff Report

_IMF Staff Country Reports, June 5, 2023_

## Source details

**Canonical URL:** [Cyprus: 2023 Article IV Consultation-Press Release; and Staff Report](https://www.imf.org/en/publications/cr/issues/2023/06/05/cyprus-2023-article-iv-consultation-press-release-and-staff-report-534261)

## Other formats

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## Bibliographic details
- Published: June 5, 2023
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400244841.002

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### Outlook and macroeconomic risks
- Cyprus’s economy has been resilient to the fallout from Russia’s invasion of Ukraine.
- The outlook is uncertain with risks from:
  - an escalation of the war;
  - a possible recession in Europe.
- Inflation risks:
  - If inflation expectations rise further and the pass-through to wages intensifies, inflation could be stickier than expected.
- Financial sector vulnerability:
  - Adverse macroeconomic developments could amplify financial risks given high private debt.
- Recent shocks demonstrate fiscal policy can be a powerful tool to foster resilience.

### Fiscal policy guidance and debt dynamics
- Fiscal strategy recommendations:
  - Rebuild buffers over the medium term.
  - Aim at sustaining primary surpluses to reduce public debt over time.
  - Support fiscal policy with a risk-based fiscal framework.
- Use of fiscal space as buffers are rebuilt:
  - Direct available fiscal space to productive investments for the green and digital transitions.

### Green transition, energy policy, and investment needs
- Cyprus’s climate objective:
  - Cyprus aims to become emissions neutral by 2050.
- Key elements of the greener growth strategy:
  - Integration into the regional electric grid.
  - Expansion of renewables.
  - Liberalization of the domestic electricity market.
- Expected benefits:
  - Improved energy security.
- Requirements:
  - These measures require large public and private investments.

### Policy priorities and reform emphasis
- Promote a greener growth model as an important element of reforms.
- Strengthen resilience by combining fiscal consolidation (sustained primary surpluses) with targeted public investment in green and digital priorities.
- Implement a risk-based fiscal framework to guide medium-term fiscal consolidation and investment choices.

### Publication and document identifiers
- Pages: 62
- Volume: 2023
- Issue: 192
- Series: Country Report No. 2023/192
- DOI: https://doi.org/10.5089/9798400244841.002
- Stock No: 1CYPEA2023001
- ISBN: 9798400244841
- ISSN: 1934-7685
- Publication date on landing page: June 5, 2023

*International Monetary Fund. Cyprus: 2023 Article IV Consultation-Press Release; and Staff Report.*

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_Source: https://www.imf.org/en/publications/cr/issues/2023/06/05/cyprus-2023-article-iv-consultation-press-release-and-staff-report-534261_