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Cyprus economy expected to expand 3.1 percent in 2017

Staff Writer |
Cyprus's annual gross domestic product (GDP) of about 20 billion euros ($21.4 billion) is projected to expand by 3.1 percent in 2017, according to a study funded by the European Union (EU).

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The study by the Economics Research Center (ERC) of the University of Cyprus, said this year's growth would be based on a solid 2.9-percent comeback of the economy in 2016.

Cyprus was pulled back from the brink of bankruptcy by the Eurogroup and the International Monetary Fund in March 2013, under a 10-billion-euro economic assistance package that involved tough austerity for the people and a shakeup of the banking system.

ERC said the main drivers of the Cypriot growth were expected to be a moderate growth in the euro area and the EU, and a further strengthening of economic sentiment in Cyprus and in the EU.

Other factors cited were the ongoing normalization of the domestic banking sector, which included the listing of the leading lender Bank of Cyprus on the London Stock Exchange and a marked increase in deposits, deleveraging, and low lending interest rates.

Downside risks for the Cypriot economy listed by ERC were an expected slowdown in Britain and the depreciation of the pound against the euro because of the Brexit uncertainty, weaker than expected growth in the EU, the high level of private borrowing from the banks and the high public debt-to-GDP ratio.

"This renders Cyprus vulnerable to external negative shocks," ERC said.

But these risks were mostly offset by improved economic conditions in Russia. A increased number of Russian visitors helped Cypriot tourism grow by about 20 percent in 2016, making it the best year so far.

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