Cyprus and International, Economic Analysis

Cyprus Quarterly Economic Outlook, Year 3, Issue 1

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Cyprus Quarterly Economic Outlook
Authors: G. Hardouvelis, I. Gkionis
Publication: March 2018, Year 3, Issue 1

Key points

  • The re-election of President Anastasiades ensures policy continuity for the next five years, yet new challenges appear driven by rising public expectations
  • In Q4-2017 the economy expanded by 3.9% on an annual basis, bringing the full year performance to 3.9% – the highest during the post-Lehman decade – up from 3.4% in 2016 and 2% in 2015
  • Most forecasters believe the Cypriot economy is at its cyclical peak to be followed by a slightly lower GDP growth in 2018, yet we think risks to the upside are also present thanks to an investment boom
  • Rating agencies began a new round of sovereign reviews: S&P maintained unchanged its long-term sovereign rating of BB+ with a positive outlook
  • Sustainable medium-term growth requires tackling head on the legacy issues of the previous crisis:

o   Stabilize the cooperative banks and speed up the reduction of non-performing loans

o   Generate political consensus in order to implement the remaining structural reforms in the MoU

o   Maintain solid fiscal performance also with an eye to further bring down public debt

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