The International Monetary Fund (IMF) welcomed the strong recovery of Cyprus’ economy but warned over the banking sector’s bad loans ratio, in a report published on Monday as part of the Article IV consultation with the country.
“Banks are making progress in cleaning up their balance sheets. Nevertheless, the banking sector still faces one of the highest non-performing loan ratios in Europe, while both private and public sectors have a large debt overhang,” the fund said.
IMF’s executive directors welcomed the strong post-crisis economic recovery, which has supported large fiscal surpluses and lowered the unemployment rate.
“Directors observed, however, that private and public debt remain large while NPL ratios are still among the highest in Europe. They encouraged the authorities to make further efforts to address these legacy problems and strengthen economic growth over the medium term,” IMF says.
According to the report, the near-term outlook for the economy is favorable, with growth expected to remain at around 4.2 percent in 2018–19, supported by the services sector and largely foreign-financed investments.