Cyprus' economy expected to pick up speed over next 2 years

Markets Associated Press

Cyprus' economic growth is projected to pick up from 2.8 percent this year to around 3 percent annually over the next two years, the governor of the east Mediterranean island's Central Bank said Friday.

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Chrystalla Georghadji said in the bank's annual report that the positive outlook is owed to an uptick in tourism, strong consumer demand, investment and exports.

She said unemployment is forecast to drop nearly two percentage points in 2017 to 10.7 percent, and to 8.8 percent in 2018.

Georghadji said risks include the potential impact of Britain's departure from the European Union as well as a slower-than-expected reduction in the island's huge number of bad loans. Among the positive developments, she cited ongoing offshore oil and gas search.

Georghadji said that despite the relatively strong economic growth projections, it could take as long as a decade to deal with the banking sector's bad loans problem.

Nearly half of all loans in Cyprus are sour, a vestige of a 2013 banking crisis that forced the island to strike a three-year, multibillion euro rescue deal with its eurozone partners and the International Monetary Fund.

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The crisis forced the seizure of uninsured savings in Cyprus' largest bank and the closure of its second-largest lender.

Georghadji said inflation is forecast to rise from 0.9 percent this year to 1.5 and 1.6 percent in the next two years, respectively.