30 Apr 2017 Exec summary Sapienta Country Analysis Cyprus

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The following is a shortened version of executive summary in the monthly, in-depth Sapienta Country Analysis Cyprus. For more about Country Analysis Cyprus visit here. For subscription options, visit the subscription page 

Political analysis and outlook: With presidential elections due in early 2018, expectations for a solution of the Cyprus problem are low, and with Turkey reacting to offshore gas drilling, risks to political and economic stability are rising.

Structural reforms and natural gas: Contracts for the third gas licensing round were signed in April amid warnings to companies form Turkey. Plans for a commercial court are afoot but healthcare reform and Cyta privatization remain contentious.

Fiscal performance and forecast:  Public debt rose slightly in 2017 but for debt-risk management reasons. We expect another debt issue this year but the timing is uncertain. Historical fiscal data have been revised.

Banking sector: Privatization of the Cooperative Central Bank could be challenging for a number of reasons. Loan demand is on the rise again although bad loan workouts mean that the debt stock continues to fall.

Macroeconomic trends and forecast: Tourism arrivals have been robust despite a slowdown from the UK. Inflation is eating into disposable incomes. The impact of the citizenship scheme is beginning to show up in FDI figures.

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