The Cyprus economy will continue to grow steadily in 2018 and 2019. This opinion is expressed in the forecast of the Center for Economic Research (ERC) of the University of Cyprus, published on May 3.
ERC believes that the country’s real GDP this year will increase by 3.8%, and next year the growth rate will slow down slightly and amount to 3.5%.
Strategic objectives for the continued growth of the Cypriot economy ERC calls for increased economic activity and improved labor market conditions in the last quarter of 2017 and in the first quarter of 2018. Important factors are the unprecedentedly high levels of confidence that show consumers in relation to the economic situation, as well as the strengthening of the positions of Cyprus trade partners and the generally high level of economic expectations in the EU. Among other reasons for the rise in prices for favorable conditions both in foreign borrowing markets and in softening the terms of lending in the domestic market.
In its list of risk factors, ERC notes the high level of unearned debt in the Cyprus banking system, which is exacerbated by delays in the modernization of insolvency laws and the alienation of property.
This could negatively affect the financial stability of the country and deter the owner of investors.
An imbalance in the state budget can make the economy of an external risk agent and lead to the achievement of the cost of borrowing. According to ERC, Cyprus is urgently needed to continue carrying out structural reforms (including in the public sector, the judiciary, local authorities). Otherwise, delays can negatively affect the confidence of business and investment circles, the stability of public finances and the prospects for growth. Another significant potential risk factor is a slowdown in the UK and weakening of the pound due to breccitis.
On the other hand, large public and private infrastructure projects in Cyprus and increased growth in the EU can lead to a greater growth of the Cypriot economy than forecast.