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Political analysis and outlook: We are holding the prospects of a solution of the Cyprus problem within the next 12 months at 45% as efforts to keep the talks going continue, but are putting them on review for a significant downgrade.
Structural reforms and natural gas: The timetable for gas drilling is still uncertain at a time when gas competition is increasing. Local government reform has been postponed but healthcare reform is making steady progress.
Fiscal performance and forecast: Revenue growth turned positive in September and the government is keeping a tight rein on spending. An agreement with the unions will limit pay rises in 2017.
Banking sector: The Bank of Cyprus London listing is going ahead, although the bank is not yet ready to list on the premium index. Deleveraging is taking place both among performing and non-performing loans.
Macroeconomic trends and forecast: Quarterly real GDP growth slowed slightly in the third quarter but accelerated year on year. Indicators on consumer spending are mixed. We have revised down our real GDP forecast to 2.8% in 2016 and 2.6% in 2017.