The European Bank of Reconstruction and Development, which holds a 5 per cent shareholding in Bank of Cyprus and a 5.4 per cent in Hellenic Bank, said that it expects Cyprus’s economy to grow 1.7 per cent this year.
In 2017, Cyprus’s economic growth will accelerate to 2 per cent, EBRD said in a statement on its website on Wednesday. Growth in 2016 and 2017 “is likely to remain low as banks remain burdened by high non-performing loans and the elevated level of public debt constrains fiscal spending”.
Cyprus, which exited its adjustment programme in March, “has made an impressive recovery after being hit by a deep crisis in April 2013”.
The 2016 forecast is slightly more optimistic compared to that of the finance ministry and the International Monetary Fund -which expect the economy to expand 1.5 per cent and 1.6 per cent respectively this year before growth accelerates to 2 per cent in 2017- and in line with that of the European Commission.
“Economic growth returned in 2015 at 1.6 per cent after three years of contraction,” said EBRD, which pledged to inject up to €700m in funds into Cyprus’s economy. “The government has met or out-performed fiscal targets amid widespread acceptance of the need for initial painful austerity measures. However, the privatisation programme is lagging behind as the proposed sale of key assets has encountered significant internal resistance”.