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The European Bank for Reconstruction and Development (EBRD) has upgraded its growth forecast for 2017 and 2018, by 1% and 0.3% respectively, for the Cypriot economy, with concerns however regarding the very high levels of indebtedness in the economy and the large legacy of NPLs. 

In a report on the growth in 37 countries in which it has invested, published on Tuesday, EBRD expects that the growth rate of the Cypriot economy will reach 3.5% from 2.5% in its previous estimate, in May 2017. For the year 2018, it expects a growth rate of 2.5%, up from 2.2% estimated in May. 

According to EBRD, “economic activity has speeded up in 2017, building on the robust recovery of the past couple of years,” and “GDP growth is estimated at 3.6 per cent year on year in H1 2017, driven by strong performances in retail and wholesale trade, construction and manufacturing.” 

It furthermore notes that “leading indicators point to another exceptional year for tourism, which is continuing to benefit from instability elsewhere (in the first nine months of 2017, the number of tourist arrivals was nearly 15 per cent higher than in the same period in 2016).” 

“In light of these trends, we are upgrading our annual GDP growth forecast for 2017 from 2.5 to 3.5 per cent,” EBRD says. 

EBRD notes that “we also expect the solid economic recovery to continue in 2018, at a moderated rate of 2.5 per cent.” 

“Nevertheless, significant headwinds remain, including the very high levels of indebtedness in the economy, and the large legacy of NPLs which still account for nearly half of all loans and are being dealt with only slowly,” EBRD warns.

Source: Stockwatch