After conducting an amplitude of research on Cyprus’ economy, the Economic Research Center (ERC) of the University of Cyprus has concluded that the likelihood of economic growth in Cyprus is promising. The projected economic growth is 3.9%, indicating that the main contributing factors are low interest rates and inflation, foreign direct investment, and tourism.
Through modernising Cyprus’ insolvency framework and as well as the legislation on the sale of loans and loan securitization; it is expected that investors and depositors will place their trust and confidence, again, in Cyprus’ financial institutions.
After all, mistrust and unpredictability are the two factors which had the most impact on the downfall of Cyprus’ economy and financial institutions. It is a very positive sign that the financial sector is looking to improve its infrastructure and adapt to modernity.
The foundation of the new and improved infrastructure was built by the request placed by the European Commision. This request came through when Cyprus’ Cooperative Bank was to merge with Hellenic Bank.
The Commission would accept this only under the condition that several laws and regulations would change in order to improve the infrastructure of the economy and to avoid any further surplus of non-performing loans.
The Economic Research Center warns that there are moral dangers which could put the economy and economic growth at risk. These dangers are mostly raised by the way property is valued and to what extent financial institutions are willing to service certain properties depending on their market value.
After plunging into severe economic recession, Cyprus has stood on its feet again. Last year, Cyprus’ economy has grown 3.9%, showing promising development. Also in 2017, the government had generated 1.8% surplus, which is only .1% more than the surplus expected to be generated at the end of Q4 2018.
In 2017, public debt fell to 97.5% of the economy, and is expected to increase again and to pass the 100% mark, due to the closure of the Cyprus’ Cooperative Bank and the €3.2 billion in bonds issued.
The islands credit rating still remains to be in the non-investment grade for the reason that there is very high public and private debt. The combined debt of the public and private sectors is at least 2 times more than the economy of the island as a whole.
With reconstructive processes taking place across the financial, legislative, public, and private sectors, there is great room for hope, and even more room for extraordinary minds to rejuvenate the economy and status of Cyprus.