Cyprus GDP to Grow by 3.6% in 2019

The University of Cyprus (UCY) Economic Research Centre has predicted that real GDP in Cyprus will grow by 3.6% in 2019 and 3.1% in 2020.

In its Economic Outlook November issue the Centre says that “real economic activity in Cyprus is expected to continue to increase at robust rates in 2019 and 2020, albeit at a slower pace compared to 2018.”

“The growth rate of real GDP is projected to slow from 4.1% in 2018 to 3.6% in 2019,” it reads.

Growth, it continues, “is projected to decelerate further in 2020 as real GDP is forecast to increase by 3.1%. “

According to the Economics Research Centre the drivers of the outlook include a mixture of domestic and external factors, such as domestic robust activity and employment growth in the previous quarters, low domestic lending interest rates and supportive external financial conditions, subdued inflation, and the country’s sound fiscal position.

“A key element of the strong growth rates projected, especially for 2019, is the revision to the GDP time series,” it says.

In particular, it adds, the upward revision to the GDP growth rates for the first quarter of 2019 and 2018 as a whole created stronger carryover effects, affecting the outlook favourably.

At the same time, it warns that “downside risks to the projections may stem from slower progress with private sector deleveraging and slower progress with the reduction of NPLs, especially as the response to the “Estia” scheme for vulnerable borrowers has been limited, raising concerns about the extent of strategic defaults and the effectiveness of the foreclosure framework.”

The high level of public debt, it says, together with the strong link between bank and sovereign risk, and potential pressures to public finances such as court rulings on the reversal of past public sector pay cuts and the newly introduced NHS, “continue to pose risks to the outlook.”

Other downside risks could arise from the prolonged uncertainty regarding the Brexit deal, weaker-than-expected growth in the euro area, the UK and Russia, and geopolitical tensions.

On the other hand, the Economic Research Centre notes, “upside risks to the outlook are associated with a higher degree of materialisation of investments than that reflected in the predictors.”

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