Cypriot public finances improved due to increased growth, although they are expected to be adversely affected due to a projected slowdown in the next few months, according to the 13th Post-Programme Surveillance Report for Cyprus, Finance Minister Constantinos Petrides’ said after participating in the Eurogroup meeting held in Brussels on Monday.
Regarding the banking sector, the report shows that the stock of non-performing loans (NPLs) remained stable after having significantly declined last year, while Russia’s invasion of Ukraine did not pose particular problems for the financial sector. However, according to the report, the continuing suspension of the implementation of the divestment framework contradicts the objective to further reduce NPLs.
In his intervention, Petrides welcomed the conclusions presented in the report of the European Commission and the institutions, noting that they converge with those of the Cypriot government.
The Finance Minister added that the Cypriot economy exceeded growth expectations during the first half of 2022. Fiscal performance exceeded expectations, with public debt showing the largest reduction as a percentage of GDP at EU level, supported by strong growth across the economy. A slowdown is expected in 2023, due to the impact of rising interest rates and declining disposable income.
Regarding the banking sector, Petrides stressed that strong collective efforts have been made by all stakeholders in recent years to reduce Non Performing Loans (NPLs) in the banking sector and significant progress has been made with NPLs falling by more than 100% of GDP.
Petrides underlined that the government is committed to continue towards the reduction of NPLs through clear policies, some of which are included in the Recovery Fund.
Finally, Petrides noted that the main policy objective of the Cypriot government remains to ensure macroeconomic stability, further reduction of public debt and NPLs in order to facilitate growth and job creation.