SAPIENTA COUNTRY ANALYSIS CYPRUS

Political analysis and outlook. Greek Cypriots have been sidelined in Greece-Turkey maritime delimitation talks. A resumption of talks to solve the Cyprus problem seems unlikely regardless of who wins the Turkish Cypriot leadership election in October.

Structural reforms and natural gas. The Republic of Cyprus’ gas ambitions look set to continue to be challenged by Turkey. EU funds, carbon taxes and the submarine electricity cable may provide space for renewables.

Fiscal performance and forecast. The government issued more debt in July, bringing the total this year to €4.5bn, and has plans for further Covid-19 support. In northern Cyprus, revenue growth accelerated in June.

Banking sector. Bad loans are likely to start rising again after a slow downward trend before the pandemic. In northern Cyprus, all top 5 banks reported strong returns on assets in 2019.

Macroeconomic trends and forecast. The Economic Sentiment Indicator (CyREC) and a recent Eurobarometer survey underline the variable impact of the Covid-19 pandemic on different economic sectors. We continue to forecast a 5.7% real GDP decline in 2020.

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