EBRD upgrades Cyprus growth forecast

The European Bank for Reconstruction and Development (EBRD) has upgraded its forecast for the growth of Cyprus economy in 2016 by 1 percentage point, to 2.7% from 1.7% in May 2016. In its forecasts for November 2016, the Bank also upgrades its forecast for GDP growth in 2017 by 0.2% to 2.2%.

The upgrade of the forecast from the EBRD comes after the upgrade of the forecast of the International Monetary Fund for Cyprus last month, which predicts GDP growth of 2.8% for 2016 and 2.2% for 2017.

In relation to Cyprus, EBRD, notes that growth accelerated in the first half of 2016 to 2.7 percent year-on-year, and consumer confidence has risen sharply, exceeding the EU average in recent months and supporting strong private consumption growth.

The more dynamic economy had positive spillovers on the labour market, as the unemployment rate has begun to fall, reaching 12.0 per cent in mid-2016 compared with the 2014 peak of 16.3 per cent.

Fiscal performance has also been strong, with the fiscal deficit falling to just 1 per cent of GDP in 2015.

Nevertheless, it is noted that general government debt is still high, exceeding 100 per cent of GDP at the end of 2015. Overall growth in 2016 is likely to be around 2.7 per cent, moderating somewhat to 2.2 per cent in 2017, as high levels of public and private debt, and a large overhang of non-performing loans in the banking sector, continue to constrain growth.

EBRD predicts growth of 1.6% in 2016 for its area upgrading by 0.2% its forecast compared with May 2016. It also projects GDP growth of 2.5% in 2017.