IMF praises Cyprus economy’s “impressive recovery”, warns of legacy issues

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The International Monetary Fund, one of Cyprus’ international lenders in the 2013 bailout, praised the “impressive recovery of the eastern Mediterranean island’s economy, but also issued a warning about legacy issues, a statement said on Friday.

The IMF said in a statement, issued after its Directors approved a post-bailout report on Cyprus, mentioned high private debt and the high ratio of non-performing loans as issues demanding urgent attention.

“They urged the authorities to take advantage of the current strong growth momentum to resolve legacy problems and generate a broader basis for future growth,” the IMF statement added.

It also said that the progress on reducing non-performing loans has been tepid, private and public debt remains high.

Noting that Cyprus’ growth this year is expected to go up by 3.8 percent of GDP, followed by 3.6 percent in 2018, the IMF Directors said in their report that “the current momentum is expected to persist for the next several years, underpinned by ongoing large construction projects.”

However, they also warned that the strong growth cycle could be threatened by excessive concentration on construction activity and real estate and also by potentially volatile capital flows.

The IMF also called for strengthening competition and productivity to attract investment and help diversify the economy.

The IMF contributed 1 billion euros in the 2013 Cyprus bailout, in which the Eurogroup contributed 10 billion euros. However, Cyprus drew only 7.5 billion euros from the assistance package.

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