The International Monetary Fund predicts the growth of the economy of Cyprus at the level of 4% in 2018 and 4,2% - in 2019-m, even though the risks associated with a large amount of unearned debt remain. This is stated in the official statement of the fund 7 June on the results of the second assessment mission in Cyprus.
The IMF points out that economic growth is primarily due to ongoing and planned construction projects, the effect of which compensates for the decline in consumer demand caused by the increase in payments on loans from households. At the same time, overdue debts on the balance sheets of Cypriot banks do not allow to correct the financial situation for households and companies. "Political and public acceptance of strategic bankruptcies continues to undermine the scope of financial intermediaries," the statement said.
The IMF also forecasts a decrease in the unemployment rate to 9,5% this year and to 8% in 2019. The budget surplus will reach 1,8% of GDP in this and 2,1% next year. The current account deficit will decrease to 5,1% of GDP and again grow to 7,2% in 2018 and 2019, respectively. Thanks to the constantly surplus budget in the next five years, by the year of 2023 Cyprus will be able to reduce its state debt to 72% of GDP.
Among the risk factors, the organization calls the low quality of bank assets and insufficient diversification of the economy. The IMF recommends that Cyprus adjust its legislation on insolvency and bankruptcy. In addition, the fund calls on the authorities to restart the process of structural reforms, which will help diversify the economy and attract capital to innovative industries.
The international organization also warns Cyprus against excessive concentration on the real estate sector, which is currently being stimulated by the demand for the "citizenship for investment" program, and also recalls the importance of absolute compliance with anti-money laundering and anti-money laundering standards.