Cyprus Quarterly Economic Monitor
Authors: G. Hardouvelis, I. Gkionis
Publication: June 2016, Year 1 |Issue 1
Key points:
- In March 2016, Cyprus became the third EMU country under surveillance to exit its Economic Adjustment Program, two months before the official expiration date, with no need to withdraw the full ClObn available credit
- Cyprus’ success in exiting the Program was driven by the high level of ownership of the program, a timely delivery of the Program conditionalities and a prudent policy of fiscal mix, which preserved the country’s comparative advantages
- After three years of recession over 2012-2014 and a cumulative drop of 10.5% of GDP, the economy of Cyprus expanded by +1.6% YoY in 2015 and is expected to gain momentum above +2.5% YoY in 2016, beyond recent forecasts by international organizations
- A new parliament after the May elections does not alter the main characteristics of the government
- For the economy to continue its upward momentum, reforms ought to continue hand in hand with growth preserving macroeconomic policies
- The main risks ahead are concentrated in the financial sector and the ability to quickly reduce the high NPL ratio. A British exit from the EU could also generate a period of uncertainty