31 Aug 2017 Country Analysis Cyprus: short executive summary


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Political analysis and outlook: The Cyprus problem is likely to remain in limbo for a while, as the UN has taken a step back. Rumours have resurfaced about Greek Cypriot plans for a two-state solution, while Turkey has been sending mixed messages about abandoning a federal settlement.

Structural reforms and natural gas: Initial results of the offshore natural gas drilling will be delivered to the government in September. The government has started the process of privatizing the state lottery.

Fiscal performance and forecast: Revenue growth continues to accelerate and pre-election spending has also started to rise. We continue to expect the debt/GDP ratio to fall below 100% in 2018.

Banking sector: BOC continues to cut NPLs aggressively but reported a loss of over €500m in the first half after a higher than usual increase in provisions. RCB has received a credit upgrade and banks have started lending again.

Macroeconomic trends and forecast: Real GDP grew by 3.6% in the first half of the year and we have revised up our forecast for 2017 to 3.5%. However, there are some potential signs of a slowdown from the second half of the year and Brexit will affect UK tourism in 2018.

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Full report: ISSN 2301-2439, Sapienta Country Analysis, Cyprus