Cyprus: Third Post-Program Monitoring Discussions-Press Release and Staff Report

International Monetary Fund

No 2019/151, IMF Staff Country Reports from International Monetary Fund

Abstract: This paper presents the Third Post-Program Monitoring discussions with Cyprus. Cyprus’s rapid recovery is expected to slow gradually; however, the outlook remains favorable. Economic growth is gradually decelerating but remains strong, buoyed by the services and construction sectors, partly financed with foreign direct investment. While employment is picking up, wage pressures and inflation remain low. A large fiscal surplus is helping to lower public debt after a sizable one-off increase related to the sale of Cyprus Cooperative Bank in the year 2018. Repayment capacity appears to be adequate under the baseline scenario given the expected decline of gross public debt, a stable debt servicing profile, and continued favorable market conditions. Policies should aim to continue strengthening bank balance sheets while avoiding the commitment of public resources. The Estia scheme, aimed at encouraging non-performing borrowers to start servicing their loans, should not be allowed to lead to further risks of moral hazard. The subsidy support, mandated write-offs by banks and enhanced foreclosure threats on re-defaulting restructured loans are expected to strengthen incentives to service restructured loans.

Keywords: ISCR; CR; Cyprus; IMF staff estimate; capacity; growth outlook; CCB's non-performing loans; General government balance; crisis economic recovery; NPL portfolio; executive board assessment; Nonperforming loans; Loans; Debt service; Fiscal stance; Global (search for similar items in EconPapers)
Pages: 59
Date: 2019-06-03
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=46962 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfscr:2019/151

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Staff Country Reports from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().