Political analysis and outlook. Both parts of the island have imposed a night-time curfew in response to the Covid-19 crisis. Test rates seem to be low compared with other countries. The political response to the crisis has also deepened the division of the island, potentially irreversibly, although the UN-monitored buffer zone will remain porous.

Structural reforms and natural gas. The pandemic has naturally revealed strains in the universal public healthcare system, which is only half way through its rollout. The collapse of oil and gas prices has further dampened the already weak prospects for natural gas exports.

Fiscal performance and forecast. We have revised our forecast for the general government budget and public debt to take into account the suspension of various revenues and the decline in GDP. The Turkish Cypriot administration implemented some measures for income support but also cut public-sector salaries.

Banking sector. We have produced estimates for the impact of the 9-month loans suspension on banking-sector revenues as a whole as well as on Bank of Cyprus and Hellenic Bank. The Turkish Cypriot central bank is also working with local banks on guarantees and other support.

Macroeconomic trends and forecast. We have produced three scenarios for real GDP growth in 2020-21, with a baseline decline of 6.2% this year. We have also produced forecasts for key sectors. The Turkish Cypriot economy will be hit by declines in both the tourism and the important university sectors.

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