Country Economic Forecasts > Cyprus

With a second quarter of GDP growth in Q2 2015, Cyprus is emerging from three years of recession. We now expect growth of 0.5% in 2015 and then a further gradual pick-up to 1.4% in 2016 and about 2% a year in 2017-19. The recovery is currently being driven by positive developments abroad, with exports benefiting from the weaker euro and tourism sector benefited strongly from rising demand in the Eurozone. But domestic demand is also looking healthier. Consumers have started to spend again and investor confidence has been picking up, hinting at an improving investment outlook. And the budget position has improved significantly, which along with the start of removal of capital controls has brought credit rating upgrades in recent months. But the government remains under pressure to reduce its spending given that public debt remains high (at 106% of GDP). And the high level of non-performing loans continues to weigh on the recovery, although there are now some signs of stabilisation. Finally, Cyprus remains at risk of a possible 'Grexit' and the continued deep recession in Russia.