Statement by the European Commission, ECB and IMF on the Third Review Mission to Cyprus
The bailed out Cypriot economy is performing better than expected according to a statement by the troika -the European Commission (EC), European Central Bank (ECB), and the International Monetary Fund after a visit to Nikosia to assess its progress.
“Cyprus’s programme remains on track, with the macro-fiscal outturn better than expected. Fiscal targets for 2013 have been met with considerable margin, due to both continued prudent budget execution and a less severe recession than anticipated,” a statement issued by the troika on February 11 says.
The Cyptrio economy is estimated to have contracted by about 6% in real terms, whch, while significant, is almost two percentage points better than forecasted at the time of the last review according to the review.
Private consumption contracted, although by less than expected, while tourism and professional services have proven resilient.
Cyrpus’ financial sector, which caused the island economy’s meltdown and was deemed “oversized” by the troika in spring, is also showing signs of stabilization, the statement says.
“The economy is adjusting flexibly as prices and wages are declining, helping to cushion the full impact of the recession on jobs,” according to the troika.
This year the Cypriot economy is projected to contract by 4.8 percent amd a return to growth is expected in 2015.
But, the troika points out that the risks remain substantial. Among the challenges are the high level of non-performing loans and the need to normalise payment flows in the economy while safeguarding financial stability.
Cyprus’ capital controls, imposed when the country was forced to ask for and receive a bailout in March 2013, have been slightly relaxed with a second phase of relaxation expected shortly.