Analysts Expect Slight Improvement for Cyprus Economy in 2015

According to the International Monetary Fund, the Cyprus economy is expected to grow 0.2 percent for the year, which is a reversal from three years of economic contraction. Experts expect businesses from the European Union to play a role in the economic recovery. Cyprus is a nation located to the east of the Mediterranean Sea. Its inhabitants are mostly of Greek descent, but many are Turkish.

According to the International Monetary Fund, the Cyprus economy is expected to grow 0.2 percent for the year, which is a reversal from three years of economic contraction. Experts expect businesses from the European Union to play a role in the economic recovery. Cyprus is a nation located to the east of the Mediterranean Sea. Its inhabitants are mostly of Greek descent, but many are Turkish.

Like many nations, the success of the Cyprus economy hinges in part on the success of other countries. Greece and Russia are important to Cyprus, but both nations are undergoing economic challenges, which impact the island nation. Greece in particular is important because the island holds a great deal of public and corporate bonds, and many Cypriot banks were affected when the bonds plummeted in value during Greece’s financial crisis.

Cyprus underwent its own troubles, and the economy received a bailout program from the IMF and EU in the form of a 10 billion euro package to tackle the 2013-banking crisis. Cyprus seized uninsured savings accounts to save the banking sector. To keep the economy afloat, the IMF suggested various reforms to help Cyprus. For one thing, the IMF recommends swift instillation of solvency and foreclosure laws that would lower the number of bad debts floating around the nation. Doing so would foster the free flow of credit again, allowing businesses and consumers to gain access to credit. Such reforms would create more jobs and speed up the recovery.

In addition, the government needs to address the enormous debt burden still plaguing the economy. At the end of 2014, public debt landed at 107 percent of GDP. Despite the high debt, wage cuts in the public sector are not on the table in the near future. Part of this has to do with upcoming parliamentary elections, and the IMF is concerned that the government will postpone reforms. Cyprus also has a larger political problem to overcome in the future.

The Mediterranean island is divided between north and south. Northern Cyprus is recognized solely by the Turkish government, with the Greek government controlling the southern portion. Talks are ongoing in regards to potential reunification, and leftist leader of Turkish Cyprus, Mustafa Akinci, won a presidential election in April, campaigning on a platform of peace with the south. Regardless of the division, Cyprus as a whole faces a tough road ahead, but the island is gaining traction. The southern government has instilled new reforms, implemented a new welfare system, and created a schedule in order to pay off the debt load. President Nicos Anastasiades is confident that his country will become stronger when more reforms are in place.