Cyprus Mail

Hellenic Bank says it expects economy to grow 3.5% this year

Hellenic Bank, Cyprus’s third-largest lender, said that it expects the Cypriot economy to expand 3.5 per cent this year and growth to slow down to 3.2 per cent in 2018 as reforms came to a halt.

“The acceleration of structural reforms would contribute to the revitalization of productive investments which have recently picked up but are still impeded by certain structural weaknesses,” including delays with construction permits and enforcement of contracts, the bank said in an emailed statement accompanying its September economic review.

“The strengthening of the real economy is expected to be reflected into improved labour market conditions,” Hellenic said. “Inflation is also expected to remain relatively low”.

The bank, whose forecast almost matched the latest upwards revised forecast of the Ministry of Finance which expects the economy to expand 3.6 per cent this year and growth to slow down to 3 per cent in 2018, said that after public finances were “consolidated to a large extent to secure the sustainability of public debt,” the level of non-performing loans in the banking system, even though in decline, remains very high, ultimately leading to increased provisioning levels “to ensure that collateral valuations are reliable and underpin appropriate levels of provisioning”.

As a result of the better than expected economic performance and the subsequent credit rating upgrades, the government was able to reduce liquidity risk also by extending debt maturities via cheaper borrowing, the bank said. “Prudent and disciplined management of public finances must continue unobstructed with focus on the real and substantial reforms for fiscal consolidation which will lead to long-term benefits”.

The bank said that the real estate market is recovering with transaction activity “picking up”, aided by incentives including a 50 per cent slash of property transfer fees, exemption from capital gains tax and the offer of citizenships to investors.

“The tax and incentive schemes, which have been rightly granted, have attracted considerable investment in real estate,” Hellenic said. “Regarding the scheme for naturalisation of investors in Cyprus by exemption, one of the proposed – but not required – economic criteria that could be met to apply for the acquisition of the Cypriot citizenship concerns the purchase, establishment or participation in companies or organisations with proven physical presence in Cyprus, having significant turnover and employing at least five Cypriot or citizens of European Union member-states. This particular criterion, contrary to other ones which concern only investment in immovable property without required physical presence, could be further enhanced as this generates long-term benefits which can be widely spread across economic sectors and beyond construction”.

Hellenic said that its agreement with non-performing loans specialist APS Holdings is an important initiative towards setting up a “functional secondary market” for non-performing loans, allowing the acceleration of reduction of delinquent loans from the bank’s balance sheets, as it will “facilitate price discovery”.

Related posts

Tylliria: beautiful, remote, struggling

Evie Andreou

Coronavirus: Eleven new cases, six of them linked to woman from US (Updated)

George Psyllides

Elderly man dies trying to park car

Staff Reporter

Masks are changing how we look

Alix Norman

President to participate in Lebanon donor conference

Coronavirus: Aradippou mayor outed for not wearing mask

Staff Reporter