Insider Economy Cyprus’ vulnerabilities continue to be significant, says EC economic report

Cyprus’ vulnerabilities continue to be significant, says EC economic report

The European Commission notes that despite the recent improvement, Cyprus’ vulnerabilities, which are mostly because of long-lasting stock-imbalances, continue to be significant.

A report by the Commission to the Council entitled (Country Report Cyprus 2019 Including an In-Depth Review on the prevention and correction of macroeconomic imbalances SWD2019 1012 final) says that “stock imbalances remain high, mainly in terms of non-performing loans, private, public and external debt”,  Despite the recent improvement, Cyprus’ vulnerabilities, which are mostly because of long-lasting stock-imbalances, continue to be significant”.

The government, private and external debt ratios are still high. The large, albeit decreasing, level of non-performing loans (NPLs) and weak profitability highlight vulnerabilities in the banking sector. Adjustment issues in the labour market have largely been resolved, as reflected by the strong employment growth and the fall in unemployment. Remaining risks in this area are mostly linked to the low labour productivity, which remains a major weakness of the Cypriot economy, the Commission notes.

According to the official document, “the composition of risks has shifted over the past year and some imbalances have been reduced while others have increased”. It states that “in terms of flows, many imbalances are decreasing, helped by the cyclical upswing”. “This is particularly the case for employment conditions, which have improved significantly, with unemployment rate now at an eight year low”, the EC explains.”The deleveraging in the private sector is also progressing, mostly because of strong GDP growth, non-performing loans write-offs, cash repayments and debt-to-assets swaps”, while “nonperforming loans have been reduced significantly, as a large volume was carved out of the banking sector upon market exit of the Cyprus Cooperative Bank”.

“However, this also led to a substantial increase in public debt in 2018, though this is expected to start decreasing again in 2019”, the EC reports mentioning that “implementing effectively the policy measures in place and addressing any remaining inefficiencies are essential for further reducing the imbalances”. In any case the Commission recognizes that “some progress has been made on implementing the measures that address macroeconomic imbalances, particularly the high stock of non-performing loans”.

However, the Commission states that “reform commitments are still pending in several areas, for example the justice system reform (notably the handling of non-performing loans in the courts and the improvement of contract enforcement) and setting-up a reliable system for issuing and transferring title deeds”. “The running of the Insolvency Service and the information on borrowers still need to be improved”, says the report.

“Continued fiscal discipline is also crucial for public debt reduction”, the report warns.

(Cyprus News Agency)

Top Stories

323 new cases of COVID-19, no deaths announced on Wednesday

The Health Ministry announced 323 new Coronavirus cases out of 33,194 PCR and rapid antigen tests on Wednesday, 3, March, taking confirmed infections to...

EU’s countries deviate from common vaccination strategy, looking at Israel, Russia, China

In recent weeks, several member states of the European Union have decided to distance themselves from the bloc's common strategy for vaccination against Covid-19...

70-year-old woman in danger due to fire at her apartment

A 70-year-old woman was in danger today due to a fire that broke out at her apartment, in the area of Faneromeni, in Larnaca. According...

Where to get a rapid test on Thursday, 4 March

Aiming at the continuous surveillance of the community and the workplaces, the free programmes of rapid antigen testing of the general population and employees...

Jobless rise by an annual 28% in February 2021

The number of unemployed persons registered at the District Labour Offices on the last day of February 2021 in February 2021 rose to 32,789...


Squash soup

Ingredients: 1 kg pumpkin, cut into small cubes, approximately 5 cups 2 medium (400g) sweet potatoes, cut into cubes, approximately 2 ½ cups 1 chopped leek, only...


No visit to Cyprus is complete without enjoying the traditional meal of many small dishes known as ‘meze’. This large feast, which has been a...

Prawns with fried cheese, barley shaped pasta

Put the barley shaped pasta into a small pan with salted water, bring to a boil and when tender, drain. Peal the prawns leaving...

Salmon and shrimp sheftalies

Mix all ingredients for tabbouli in a bowl and keep to one side so flavours can combine. Prepare the sheftalies: wash and soak the casing...