Economic growth in Cyprus will accelerate even more in 2017 and 2018, University of Cyprus’ Economic Research Centre said, significantly upgrading its previous projections issued in July.
In the November Economic Outlook, the ERC said the Cypriot economy will expand with 3.6% and 3.3% in 2017 and 2018 respectively compared with 3.0% and 2.7% in the respective Outlook of November.
The ERC also upgraded its projections for economic growth in this year’s third and fourth quarters, now projected to reach 3.6% and 3.7% compared with 2.9% και 2.8% in the July projection.
“Real economic activity in Cyprus is expected to continue to expand strongly in 2017 and 2018,” the ERC said.
The ERC explained that the sizeable upgrading is due to a large upward revision to the GDP growth data for first quarter of 2017, the positive developments in domestic macroeconomic and leading indicators, and the favourable external economic conditions have also contributed to the upward revisions of the growth forecasts.
According to the EC the solid growth forecasted for the following quarters is due to the robust activity and employment growth rates registered in Cyprus in the first half of 2017, further improvements in domestic leading indicators in the third quarter of the year, strong domestic economic sentiment, restored confidence in the financial sector, the low levels of lending interest rates and favourable external economic conditions.
On the other hand, domestic downside risks concern the high levels of private debt and non-performing exposures, the high ratio of public debt to GDP, incomplete structural reforms and the introduction of permanent expenditures with unclear longer-term budget effects.
Furthermore, external factors that may affect economic growth include slower than expected growth in the UK and further depreciation of the pound against the euro.
Upside risks to the outlook are associated with public investment in infrastructure and private investment, especially in the sectors of energy, tourism and real estate, as well as with better than expected growth outturn in the euro area and Russia.