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IMF says Cypriot economic growth to remain brisk

Xinhua, April 3, 2017 Adjust font size:

Cypriot economic growth is expected to remain brisk and its GDP expansion is expected to be around 2.5 percent this year, the International Monetary Fund (IMF) said in a report released on Monday.

The report said that as a result, the capacity of the bailed-out island to repay its debt to the IMF is expected to be satisfactory.

IMF lent Cyprus 1 billion euros (1.65 billion U.S. dollars) as part of a 10 billion euros joint bail-out with the Eurogroup in March 2013.

An IMF delegation visited Cyprus at the end of March for the first post-program monitoring of its economy.

"Since exiting the IMF program one year ago, Cyprus' economic recovery has gathered momentum, banks' liquidity positions have improved, the restructuring of nonperforming loans (NPLs) has accelerated and the fiscal primary surplus has increased," the IMF report said.

Nevertheless, it said that it recorded high levels of private sector indebtedness, NPLs and vulnerabilities to the general government debt.

These would be the result of a possible new boom-bust growth cycle and erosion of fiscal discipline plus a materialization of balance sheets risks in the banking system, the report said.

The IMF suggested action in three main areas, accelerating NPLs workouts, reducing excessive debt burdens and speeding up of restructuring as far as the banking sector is concerned, acceleration of public debt reduction and reinvigorating structural reforms.

The IMF findings are generally in line with the findings of a mission by the European Commission and the European Central Bank, which released its findings at the weekend.

The Eurogroup mission additionally pointed to a risk of reduced primary surpluses.

Finance Minister Harris Georgiades has said he agrees with the findings of the EU mission but dismissed fears of a reduced primary surplus, saying the same warning for last year did not materialize. Endit