Cyprus: Staff Report for the 2014 Article IV Consultation
IMF Staff Country Reports, October 22, 2014
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- Canonical URL
- Cyprus: Staff Report for the 2014 Article IV Consultation
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Bibliographic details
- Published: October 22, 2014
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498340793.002
Background
- Large imbalances accumulated prior to the global financial crisis culminated in a collapse of the banking sector in early 2013.
- Authorities adopted an economic adjustment program, supported by official financing, aimed at securing financial stability and fiscal sustainability.
Recent developments and outlook
- GDP contracted sharply in 2013.
- Wages and prices declined, and unemployment increased.
- Bank deposit outflows have slowed, but non-performing loans have risen sharply, and credit remains impaired.
- The recession is expected to continue this year, followed by a modest recovery starting next year.
- Risks remain tilted to the downside.
Reform agenda and policy recommendations
- Overcome recent delays in the implementation of the adjustment program.
- Address high non-performing loans by:
- Putting in place a strong private-sector debt-restructuring framework.
- Enacting legislation to facilitate foreclosures.
- Modernizing the insolvency regime.
- Banks should continue to restructure and build strong capital buffers.
- Proceed prudently with the removal of external-payment restrictions.
- Continue fiscal consolidation to ensure long-run sustainability.
- Firmly implement structural reforms.
Subject areas and keywords
- Subjects: Banking, Commercial banks, Financial institutions, Nonperforming loans, Public debt, Public financial management (PFM), Revenue administration
- Keywords: Commercial banks, CR, Cyprus case, deficit-to-GDP ratio, Europe, GDP, GDP revision, Global, IMF staff estimate, ISCR, liability positions vis-à-vis nonresident, macroeconomic situation, nominal GDP, Nonperforming loans