Cyprus to stay in recession for 2015, university survey finds

Cyprus’s battered economy will remain in recession in 2015, albeit shrinking a slower pace than last year, a survey by the University of Cyprus predicted on Tuesday.

GDP will contract by 0.4 percent compared with an expected 2.2 percent decline for 2014, the university’s economic research centre said.

The forecast is gloomier than those of the government and the island’s international lenders, which predict that the economy will exit recession — with growth of around 0.5 percent — after three years of relentless gloom.

The survey said that a delay in structural reforms and the high percentage of non-performing loans would put a brake on recovery.

It said the knock taken by the economy of Russia — key tourism and investment market — would also affect the island’s ability to shake off recession, as would uncertainty about what will happen in Greece after the election of an anti-austerity government.

The survey said other factors putting a block on growth are high unemployment, high interest rates and a credit crunch.

On the up side, the survey cited the European Central Bank’s decision to begin quantative easing and the strength of sterling, which is enticing more British holidaymakers to the island.

Britain is the island’s biggest tourism market with Russia second.

The troika of international lenders — the European Commission, the European Central Bank and the International Monetary Fund — bailed out Cyprus in March 2013 to prevent a banking collapse.

In return for the bailout, Cyprus agreed to a severe austerity programme and a profound restructuring of its bloated financial sector.

The deal included a restructuring of the banks, with the island’s second-largest lender, Laiki, wound up and its good assets folded into the largest lender, Bank of Cyprus (BoC).

Fears of a bank run in March 2013 forced the government to close all the island’s banks for nearly two weeks and impose draconian controls when they reopened.

Domestic capital controls have since been lifted but some external ones remain in place.