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By Stelios Orphanides
Cyprus’s economy is expected to grow at a rate ranging from 2 per cent to 2.5 per cent in 2017 and 2018, the European Bank of Reconstruction and Development (EBRD) said.
“The picture is quite positive,” EBRD economist Artur Radzwill told reporters on Wednesday in Nicosia where the London-based lender is holding its annual general meeting.
After the island’s economy expanded 2.8 per cent last year and 1.7 per cent in 2015, “there are still important hurdles that will moderate growth in 2017 and 2018,” he said. “They are related to the legacy of the crisis in the form of high level of non-performing loans”.
According to a document handed over to reporters covering the event, the economy is expected to expand 2.5 per cent this year, which is upwards revised by a 0.3 percentage point, and 2.2 per cent next year.
Radzwill added that the level of consumer confidence recovered to levels higher than those of the European Union average.
EBRD, set up in the early 1990s to help following the end of the Cold War economies in transition, decided to launch operations in Cyprus pledging €700m in financing.
In an emailed statement, EBRD said that the strong performance of the tourism sector last year, with arrivals increasing 20 per cent to an all-time high of 3.2m, and other sectors including construction and professional services, are contributing to recovery.
EBRD deputy director for country economics and policy Peter Sanfey said that he is optimistic about the Cypriot economy’s long-term outlook.
“It’s a very open economy,” he was cited as saying. “The people are well educated, public administration functions well and some sectors are quite robust – tourism, obviously, and accounting services too, as well as some of the other high-value service sectors, which have come through quite well.”
The bank added that the government, which is facing elections in February, maintains “a prudent fiscal stance” after it generated last year a budget surplus of 0.4 per cent of the economy.
Cyprus’s challenge now is to reduce its public debt, which stood at 107.8 per cent of the economy last year, and “to maintain strong fiscal discipline in the run-up to elections in 2018,” EBRD continued.
The bank, which operates in various countries in Eastern, South-eastern and Central Europe, the Baltics, Central Asia, the Caucasus, and South Mediterranean countries, said that the economy in the region it operates will expand 2.4 per cent this year and accelerate to 2.8 per cent next year.
In Russia, Cyprus’s second largest source of incoming tourism, the economy is forecast to grow 1.2 per cent this year and 1.4 per cent in 2018, the EBRD said. Greece’s economy which stagnated last year is forecast to expand 2 per cent in 2017 and 2.2 per cent next year.
The Turkish economy, affected by the geopolitical events in the area in recent years impacting the performance of its tourism sector, is forecast to expand 2.6 per cent this year and 3 per cent in 2018.